Rationale

The 'A-1 (sf)' ratings to the standard, callable, and puttable asset-backed commercial paper (ABCP) notes issued by Jupiter Securitization Co. LLC (Jupiter) reflect the following:

• The full credit and liquidity support provided by asset purchase agreements (APAs) for fully supported transactions and the combination of liquidity support for performing assets along with pool specific credit enhancement consistent with the 'A-1' level for partially supported transactions.
• The liquidity and credit support providers, and hedge counterparties, are rated 'A-1' or higher.
• There are structural protections to ensure the bankruptcy-remote structure of Jupiter.
• JPMorgan Chase Bank N.A.'s experience and ability as program administrator to carry out day-to-day services to Jupiter, administer the issuance and maturity of ABCP notes, and draw on liquidity and credit facilities to repay ABCP notes on a timely basis.

Environmental, Social, And Governance (ESG)

The assets funded in partially supported ABCP programs may have material exposure to ESG credit factors if they influence our liquidity-enhanced credit analysis. Support providers in ABCP conduits are typically highly rated financial institutions, and our assessment of their creditworthiness incorporates any material ESG credit factors. Please refer to our U.S. and Canadian, EMEA, Asia-Pacific, and Latin American bank ESG industry report cards for additional information: ESG report cards.

Program Structure

The chart below shows an overview of the program structure.

Chart 1

Key features

Liability issuance  Jupiter has the ability to issue standard and callable ABCP notes with a tenor of 397 days, and puttable ABCP notes with a tenor of 270 days. The notes can be issued at a discount or interest-bearing basis, and may bear a fixed- or floating-rate of interest to fund eligible financial assets. We review on a case by case basis Jupiter's exposure to legal liabilities that may arise from owning equities or non-financial (i.e., operating) assets.

The callable notes may be redeemed in whole or in part at the option of Jupiter. The terms of the pricing supplements require that, upon its election to call a note and its delivery of notice pursuant to the call notice provisions, the issuing entity is obligated to pay principal and interest, or discount, as applicable, accrued up to the call date only, regardless of when the note is presented for payment.

Similarly, the puttable notes may be redeemed in whole or in part at the option of the investors. The terms of the pricing supplements require that, upon the noteholder's election to put a note, and its delivery of notice pursuant to the put notice provisions, the issuing entity is obligated to pay principal and interest, or discount, as applicable, accrued up to the put date only, regardless of when the note is presented for payment.

Program Overview

Counterparty/Credit Quality

Liquidity support

Program-specific  JPMorgan Chase Bank N.A. provides an uncommitted program liquidity agreement. The program liquidity agreement can only be used to repay ABCP notes in the event of market disruption.

Pool-specific  Jupiter benefits from pool-specific liquidity support typically in the form of asset purchase agreements. JPMorgan Chase Bank N.A. and other liquidity providers rated at least 'A-1' provide transaction-specific liquidity. For each receivables facility, Jupiter arranges and enters into a transaction-specific liquidity facility sized that is at least 100% of the receivables facility's limit.

Under each liquidity agreement, Jupiter has the right to draw liquidity at any time on a nonrecourse basis. Liquidity agreements may be fully supported, or partially supported. In each case, the transaction liquidity provider's sole out to funding is the bankruptcy of Jupiter, which is intended to be bankruptcy-remote, subject to the liquidity provider's limitation to not fund beyond its available liquidity commitment. Fully supported liquidity agreements do not contain any asset quality tests.

For partially supported liquidity agreements, the liquidity providers fund up to the full amount of performing assets while limiting the risk of loss to investors to typically 30 days. They fund against a funding base for which the calculation is the purchase price or the amount that the liquidity providers are required to pay; the purchase price is reduced for defaulted receivables. A funding shortfall occurs if defaulted receivables exceed the transaction-specific credit enhancement, which would leave Jupiter short of the amount needed to pay ABCP notes in full. This risk is mitigated by the various levels of credit support and the administrator's surveillance procedures. Each partially supported pool financed by Jupiter is analyzed by S&P Global Ratings to a credit quality level consistent with the 'A-1' rating.

Swingline facility agreement  There is an uncommitted swingline facility provided by JPMorgan Chase Bank N.A. equal to $100 million. The swingline facility is mainly used to fund advances that are not large enough to fund in the ABCP market due to minimum denomination requirements. It does not provide any additional protection to ABCP holders.

Credit support

Program-specific  Credit support for Jupiter is provided by JPMorgan Chase Bank N.A. in the form of a program letter of credit (LOC). This is for an amount equal to the greater of $500 million or 10% of ABCP notes outstanding (excluding 'AA' rated securities, assets supported by fully supported by liquidity, and permitted investments), advances outstanding under the swingline facility, program liquidity, depositary agreement, and Jupiter's debt obligations.

Pool-specific  Pool-specific credit support is determined on a transaction-by-transaction basis. It may be carried out at the level of each seller, and may take the form of irrevocable LOCs, overcollateralization, or another form.

Interest rate protection

Liquidity facilities fund for interest accrued and to accrue to the ABCP notes' maturity.

Based on our analysis of the interest rate risk present for floating-rate ABCP notes (that is, the risk that the SOFR or the federal funds rate may increase during the tenor of any floating-rate notes such that the aggregate principal and interest amounts due on outstanding ABCP notes could exceed the amounts available under the liquidity facilities), S&P Global Ratings will allocate program-wide credit enhancement equal to 2.8% of each issuing entity's floating-rate ABCP note issuances. Therefore, our analysis reflects our view of the extent that the one-month SOFR or the federal funds rate could increase during the maximum permitted tenor of 397 days for floating-rate ABCP notes at the 'A-1' stress level and takes into consideration the above-mentioned ABCP notes issuance test whereby increases in the SOFR or the federal funds rate at each successive monthly reset date is built-in to the calculation of the aggregate ABCP note interest amount.

In relation to Jupiter's issuance of floating-rate notes, JPMorgan Chase Bank N.A. allocates program-wide credit enhancement equal to 2.8% of the principal amount of outstanding floating-rate issuance to cover interest rate risk.

Foreign exchange hedging

Jupiter funds its purchase with ABCP notes in U.S. dollars, pound sterling, and euros, but can purchase receivables pools denominated in multiple foreign currencies. Jupiter will typically hedge material foreign exchange exposure related to its receivables facilities via a program-level hedge agreement with JPMorgan Chase Bank N.A.

Legal

Clawback/preference risk

ABCP investors are insulated from legal risks associated with a seller bankruptcy or with preference risk. This is documented in various ways:

• A certificate from an officer of the ABCP notes issuer (or its administrator) to the effect that the ABCP notes issuer has received satisfactory true sale or security interest opinions;
• A representation as to the satisfaction of the ordinary course of business defense from the transferor and transferee of the applicable transfer (other than the ABCP notes issuer) in the transaction;
• A security interest opinion, and representations and warranties in the transaction documents regarding security interest issues not covered by such an opinion;
• A true sale opinion with respect to the applicable transfer; or
• A liquidity facility that wraps preference payments in the funding formula.

The liquidity facility further protects ABCP notes from commingling risk by funding for collections that have been received by the seller/servicer, but not yet remitted to Jupiter. Furthermore, the contracts that support the conduit's operations provide for structural protections that isolate the assets from the bankruptcy of entities involved in each transaction, and ensure full and timely payment of ABCP notes.

Cash Flow And Payment Structure

Liability issuance tests

The conditions necessary for Jupiter to issue ABCP notes include, but are not limited to:

• The available LOC amount (program-wide credit enhancement) must not be less than the minimum required LOC amount for a period of more than 30 days;
• There must be no event of default under the program LOC agreement, and the program LOC shall be in full force and effect;
• There must be no continuing breach of representations and warranties, or covenants of Jupiter, subject to materiality qualifiers and cure periods;
• The administrative agent has provided prior consent to such issuance;
• Sufficient liquidity must be available to cover principal and interest at maturity on all outstanding ABCP notes;
• The required credit enhancement must be in place; and
• The required hedging must be in place.

Conduit wind-down events

Jupiter has a number of events outlined in the program documents that would lead to a conduit wind-down upon instructions from 66 2/3% of the ABCP noteholders (excluding JPMorgan Chase Bank N.A. as noteholder) to the trustee, including:

• Failure to pay principal or interest on any note when due and such failure remains uncured for 30 days;
• Bankruptcy or insolvency of Jupiter;
• Liquidity provider fails to make a purchase or fund an advance as required under a liquidity agreement and such failure remains uncured for 30 days; and
• Program LOC issuer fails to honor a drawing under the LOC and such failure remains uncured for 30 days.

Waterfall/payment priority

Upon a conduit wind-down event, the trustee will disburse proceeds of any collateral in the following order of priority:

• Fees to trustee not exceeding $300,000;
• Fees to third-party service providers (depositary, accountants, rating agencies, attorneys, etc.) capped at $100,000;
• Principal, and accrued and unpaid interest in respect of ABCP notes, depositary advances, program liquidity advances, and swingline bank advances, subject to a cap on interest payments to the depositary, program liquidity bank, and swingline bank;
• Fees to trustee and third-party providers not included above;
• Accrued and unpaid interest to depositary, program liquidity bank, and swingline bank not paid above;
• Liquidity fees, and other remaining fees and expenses other than administrative agent fees;
• Amounts owed to program LOC issuer under program LOC agreement; and
• Fees to administrative agent; and
• Amounts due and payable to Jupiter Holding Corp. in respect of its common membership interest in Jupiter.

Operational Risk

Review status

Jupiter may fund U.S. assets on a template-assisted basis as long as the form of liquidity supporting the asset interests is the same as the one reviewed by S&P Global Ratings. Similarly, Jupiter can fund U.S.-based post-review transactions in the following asset classes: prime auto loans, credit cards issued by master trusts with S&P Global Ratings-rated term issuances, trade receivables, and Federal Family Education Loan Program student loans.

For any asset types not mentioned above or for non-U.S.-based asset jurisdictions, each seller will be reviewed prior to closing.

Administrator review

The program administrator's experience and past performance are factors in the ratings process. We conduct ongoing administrator business reviews to evaluate JPMorgan Chase Bank N.A.'s ability to carry out responsibilities under the program documents, such as:

• Originating and structuring new receivables pools;
• Performing a formal credit evaluation for each new seller and the related receivables;
• Maintaining ongoing surveillance of asset quality and liquidity facilities;
• Maintaining and administering the issuance and maturity of ABCP notes; and
• Drawing liquidity and credit enhancement facilities, as necessary, to repay ABCP noteholders on a timely basis.

Based on the outcome of the reviews and ongoing communications with JPMorgan Chase Bank N.A., we are satisfied that it is capable of carrying out its responsibilities under conduit's program documents.

Surveillance

The ratings on all support providers in Jupiter are 'A-1' or higher. Each partially supported pool financed by Jupiter is reviewed to a credit quality level consistent with the 'A-1' rating. We monitor the ratings on all support providers and asset performance metrics on an ongoing basis.

Portfolio data

The conduit administrator has provided capacity utilization and collateral concentration data for the portfolio as a part of S&P Global Ratings' ABCP conduit surveillance process that is presented below in a standardized format.

Chart 2

Chart 3

Related Criteria

• Criteria | Structured Finance | General: Global Framework For Payment Structure And Cash Flow Analysis Of Structured Finance Securities, Dec. 22, 2020
• U.S. Structured Finance Asset Isolation And Special-Purpose Entity Criteria, May 15, 2019
• Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology And Assumptions, March 8, 2019
• Criteria | Structured Finance | ABCP: Global Methodology For Analyzing Liquidity Funding Outs And Limitations In ABCP Transactions, Oct. 27, 2014
• Criteria | Structured Finance | General: Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014
• Criteria | Structured Finance | ABCP: Global Methodology And Assumptions For Calculating Programwide Credit Enhancement In Multiseller ABCP Conduits, Feb. 14, 2013
• General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012
• Criteria | Structured Finance | ABCP: Asset-Backed Commercial Paper Issued By Multiseller Conduits: Classification And Timing Of Reviews For New-Seller Transactions, April 18, 2011
• General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
• Criteria | Structured Finance | ABCP: S&P Global Ratings' Analysis Of ABCP Ratings Following Changes To Ratings On Support Providers, Dec. 18, 2008
• Criteria | Structured Finance | ABCP: Global Asset-Backed Commercial Paper Criteria, Sept. 29, 2005

Related Research

• Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
• Credit Rating Model: Global ABCP Programwide Credit Enhancement Model, April 2, 2014
• Standard & Poor's Clarifies Its Approach To Requests For Rating Agency Confirmation On Structured Finance Transactions, May 18, 2012
• Assessing Credit Quality By The Weakest Link, Feb. 13, 2012
• Standard & Poor's Requests Transaction Performance Metrics From Sponsors Or Administrators Of Global ABCP Conduits, Jan. 12, 2012