Ratings Detail

Rationale

S&P Global Ratings' 'A-1 (sf)' short-term ratings on Aquitaine Funding Co. LLC's (Aquitaine) U.S. dollar-denominated standard, callable, puttable, and puttable/callable asset-backed commercial paper (ABCP) notes are primarily based upon:

• The program's legal structure, including Aquitaine's intended bankruptcy-remote status;
• The full credit and liquidity support provided by liquidity agreements in the form of asset purchase agreements, loan agreements, global or master securities lending agreements, global or master repurchase agreements, and hedge agreements in the form of total return swaps with counterparties rated at least 'A-1';
• The amounts received from the liquidity agreements being sufficient to pay the outstanding callable, puttable, and puttable/callable ABCP notes on their respective payment dates;
• ABCP note issuance tests that restrict the amounts to no greater than amounts that can be fully supported by liquidity agreements; and
• Deutsche Bank Trust Co. Americas' (DBTCA) ability to carry out their duties as program administrative agent.

Environmental, Social, And Governance (ESG) Factors

The credit quality of the underlying assets is not material to our rating analysis, and so there generally are no material ESG credit factors at the asset level. Support providers in ABCP conduits are typically highly rated financial institutions, and our assessment of their creditworthiness incorporates any material ESG credit factors. In our view, exposure to ESG factors in this transaction is limited to the factors related to the support provider. For further information, see our U.S. and Canadian, EMEA, Asia-Pacific, and Latin American bank ESG industry report cards.

Program Structure

The chart below shows an overview of the program's structure.

Chart 1

Key Features

Aquitaine is a bankruptcy-remote, special-purpose entity (SPE) and limited liability company incorporated under Delaware law to issue U.S. dollar-denominated standard (nonredeemable), callable, puttable, and puttable/callable ABCP notes. The ABCP notes can be issued at a discount or bear interest at a fixed rate, with maturities of up to 397 days.

Aquitaine will use the ABCP note proceeds to make intercompany loans through a credit agreement with NLMCC LLC (AssetCo), a bankruptcy-remote, multi-use SPE and limited liability company registered under Cayman law. Aquitaine will use the proceeds to enter into revolving purchase or loan arrangements, or fund financial assets, including securities

Aquitaine, or an intermediate SPE, may also enter into liquidity agreements in the form of asset purchase agreements, loan agreements, global or master securities lending agreements, global or master repurchase agreements, and hedge agreements in the form of total return swaps, etc.) with counterparties rated as high as the ABCP issued. The ABCP notes are intended to be fully supported via the program-level liquidity agreements.

Callable notes

The callable notes will give Aquitaine the right to redeem, in whole or in part, the related callable note on its call date (a specified date before the stated maturity date). The call provisions for each callable note--including call dates, call notice requirements, and the applicable interest rate--are to be set forth in a pricing supplement. The terms of the pricing supplements require that upon Aquitaine's election to call a note and its delivery of the notice according to the call notice provisions, Aquitaine is obligated to pay principal and any interest or discount, as applicable, that's accrued up until but excluding the call date.

If Aquitaine does not elect to exercise its call option, the note is required to be paid on its stated maturity date in an amount equal to principal and interest or discount (as applicable), accrued and unpaid or accreted up until the stated maturity date.

Puttable notes

The puttable notes will give the noteholder the right to be repaid, in whole or in part, on its put date (a specified date before the stated maturity date). The put provisions for each puttable note--including put dates, put notice requirements, and the applicable interest rate--will be set forth in a pricing supplement.

Upon the noteholder's election to put a note and its delivery of notice according to the put notice provisions, Aquitaine is obligated to pay principal and interest or discount (as applicable), accrued and unpaid or accreted up to but excluding the put date.

If the noteholder does not elect to exercise its put option, the note is required to be paid on its stated maturity date in an amount equal to principal and any interest or discount (as applicable), that's accrued and unpaid or accreted up to the stated maturity date.

Puttable/callable notes

The puttable/callable notes will give the noteholder and Aquitaine the same rights as described above for the puttable and callable notes. The notes can be called or put in whole or in part. The pricing supplement will dictate the precedence of the put or call option. If no early redemption option is exercised, then the notes will be paid on the stated maturity.

Program Overview

Counterparty/Credit Quality

Liquidity support

The liquidity agreements with counterparties rated at least 'A-1' provide liquidity support to the ABCP notes issued by the program.

Credit support

The ABCP notes are fully supported by the proceeds received under the liquidity agreements.

Interest rate protection

The interest received under the liquidity coverage provided by the liquidity agreements will be sufficient to cover the interest on the ABCP notes.

Foreign exchange hedging

The proceeds from the liquidity agreements are all in U.S. dollars; therefore, foreign exchange hedging is not applicable. To the extent non-U.S. dollar assets are funded under the liquidity, any amounts owed to Aquitaine under the currency hedges, including breakage costs, will be covered by the liquidity provider.

Liquidity outs

The liquidity providers are not obligated to fund if there is any insolvency event with respect to AssetCo.

Legal

Substantive consolidation

Aquitaine is a limited liability company incorporated under Delaware law, and its sole member is Nearwater Liquid Markets LLC (Nearwater), according to its formation documents. There is no ongoing economic, financial, or operational dependency on the sponsor, Nearwater, for the performance of the ABCP notes. Nearwater is the sole equity member of both NLMCC LLC and Aquitaine. Both NLMCC LLC and Aquitaine have been analyzed and are consistent with S&P Global Ratings' bankruptcy remoteness criteria. Nonconsolidation opinions were reviewed addressing the substantive consolidation risk that a bankruptcy of Nearwater, as parent, would have on both Aquitaine and AssetCo.

Clawback/preference risk

Treasuries are purchased in the open market, which mitigates preference risk. In addition, bankruptcy risk relating to payments made by liquidity providers is reflected in the rating on these counterparties.

Cash Flow And Payment Structure

Liability issuance tests

The conditions necessary for DBTCA, as administrator, to issue ABCP notes include, but are not limited to:

• Scheduled cash flows from transactions are sufficient to repay in full any related financings;
• Each transaction entered into satisfies rating agency confirmation with non-petition and limited recourse provisions;
• Each transaction counterparty satisfies the minimum rating requirements (i.e., at least the current rating on the notes);
• There is no breach of representations and warranties of Aquitaine; and
• Any transaction funded complies with the operating guidelines or asset-specific requirements.

No issuance or "stop issuance" of ABCP notes events

Aquitaine will not issue ABCP notes if any of the following events occurs, and it will pay the maturing ABCP notes if any continues:

• Aquitaine fails to pay any fees when due;
• An operational event occurs, including third-party events beyond Aquitaine's control;
• Aquitaine fails to perform any of its obligations or makes a misrepresentation that has a material adverse effect on its ability to satisfy any of its obligations; and
• The administrator resigns and is not replaced.

Program wind-down events

Aquitaine will not issue ABCP notes if any of the following events occurs, and the outstanding ABCP notes will be accelerated if any continues:

• Failure to pay maturing ABCP notes;
• The insolvency of Aquitaine; and
• Operational events that involve a material disruption in communication or third-party events beyond the control of Aquitaine.

Waterfall

The administrator can allocate proceeds from the available omnibus cash account in the following order of priority:

• Fees and expenses to the administrator not exceeding $200,000 and ensuring all asset monies are sufficient to repay in full any related financings (advances provided by Aquitaine to AssetCo via ABCP issuances, provided no wind-down event has occurred).
• If no "stop issuance" or wind-down event has occurred and is continuing, payments on related financings or to finance new assets;
• If a stop issuance event has occurred and continues, payments on the maturing ABCP notes;
• If a wind-down event has occurred and continues, all ABCP notes are accelerated; and
• Any other fees, expenses, and indemnities payable by AssetCo.

Operational Risk

Review status

Any new financing agreement that Aquitaine will enter into will be reviewed by S&P Global Ratings prior to execution.

Administrator review

The program administrator's experience and past performance are factors in the ratings process. S&P Global Ratings conducts administrator business reviews in consultation with Nearwater to evaluate DBTCA's ability to carry out responsibilities under the program documents, such as:

• Reviewing the related funding request and independently determining whether the proposed asset satisfies the funding requirements;
• Monitoring financing maturities, matching financings to corresponding asset data, and tracking all transactions related to each financing;
• Funding new assets in accordance with the terms of the related funding request; and
• Paying maturing financings and investing excess cash in cash-equivalent investments;

Based on the outcome of the reviews and ongoing communications with Nearwater and DBTCA, we are satisfied that DBTCA is capable of carrying out its responsibilities under the program documents.

Surveillance

Since the ABCP notes are intended to be fully supported based on the proceeds received under the liquidity agreements by counterparties rated at least 'A-1', we will link the 'A-1 (sf)' short-term ratings on the ABCP notes to the ratings on the liquidity agreement counterparties rated at least 'A-1'. Therefore, changes to our ratings on any liquidity counterparty, among other things, can result in changes to our rating on the ABCP notes. S&P Global Ratings monitors the ratings on all support providers on an ongoing basis.

Portfolio data

The conduit administrator has provided capacity utilization 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

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
• 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
• 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