Rationale

S&P Global Ratings' 'A-1+ (sf)' short-term rating on Collateralized Commercial Paper III Co. LLC's (CCP III) U.S. dollar-, pound sterling-, euro-, and yen-denominated asset-backed commercial paper (ABCP) notes is primarily based on:

• The program's legal structure, including CCP III's intended bankruptcy-remote status;
• The full credit and liquidity support provided by loan agreements match-funded to the terms of the notes;
• Support providers rated 'A-1+' that provide liquidity or indemnification support for any hedging shortfalls;
• The experience and ability of Global Securitization Services LLC, as program administrator, to carry out day-to-day operational services to CCP III; and
• The experience and ability of JPMorgan Chase Bank N. A., as program sub-administrator, to carry out duties under the administration agreement, monitor the maturity of the ABCP, and ensure the amounts under the loan agreements are sufficient to repay ABCP holders on a timely basis.

Environmental, Social, And Governance

The credit quality of the underlying assets is not material to our rating analysis, and so there generally are no material environmental, social, and governance (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: see ESG report cards.

Program Structure

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

Chart 1

Key Features

CCP III is a bankruptcy-remote, special-purpose Delaware limited liability company established to issue U.S. dollar-, pounds sterling-, euro-, and Japanese yen-denominated ABCP notes. The ABCP notes can be issued at a discount or bear interest at a fixed or floating rate. The Loan A U.S. and Reg S commercial paper notes will have maturities of up to 270 days, the Loan B U.S. commercial paper notes will have a maturity of up to 397 days, and the Loan B Reg S commercial paper notes will have a maturity of up to 364 days.

CCP III uses the proceeds to make loans to J.P. Morgan Securities plc (JPMS), as borrower, under two separate loan agreements (A and B). These are secured by financial assets that are pledged as the underlying collateral (separate securities accounts) to CCP III and held by JPMorgan Chase Bank N.A. (London Branch) as custodian for loan collateral A and The Bank of New York Mellon (London Branch) as custodian for loan collateral B. Eligible financial assets for Loans A and B include cash, shares, stocks, convertible securities, bonds, warrants, and American depositary receipts. CCP III's exposure to legal liabilities that could arise from owning equities or operating assets is mitigated because the conduit purchases the financial assets.

Each note is matched to the maturity of the loan (A, B), and the interest rate for the loan equals or exceeds the interest rate or yield on the note. The interest payment dates are the same as the note payment dates for the loan.

Program Overview

Counterparty/Credit Quality

Liquidity support

JPMS provides liquidity under program-level loan agreements (A, B) that fully support all notes issued by the program.

Credit support

The program is fully supported by program-level loan agreements covering all related credit risk.

Interest rate protection

Each note is matched to the maturity of the loan (A, B), and the interest rate for the loan equals or exceeds the interest rate or yield on the note. The interest payment dates are the same as the note payment dates for the related loan. Interest can be at a fixed or floating rate but is matched to the matching instructions between CCP III and JPMS.

Foreign exchange hedging

ABCP issuance and loans are match-funded such that the contractual currency for each loan is always the same as the related ABCP issuance currency, thereby mitigating any mismatch in paying ABCP.

Liquidity outs and limitations

A CCP III event of default--a bankruptcy of CCP III, the loan repayment date occurring or deemed to have occurred, or CCP III being unable to perform its obligations--does not absolve JPMS of its payment of principal and timely payment of interest on the notes.

Legal

Substantive consolidation

CCP III is a limited liability company organized in Delaware. GSS Holdings (CCP III) Inc., a Delaware organized corporation, is the sole equity member of CCP III. Both CCP III and GSS Holdings (CCP III) Inc. have been analyzed and are consistent with S&P Global Ratings' bankruptcy-remoteness criteria. Opinions, as applicable, were reviewed as part of CCP III's bankruptcy-remoteness status under Delaware law.

Clawback/preference risk

ABCP investors are insulated from legal risks associated with the bankruptcy of JPMS because payments made by JPMS under the loan agreements are reflected in the 'A-1+ (sf)' ratings.

Cash Flow And Payment Structure

Liability issuance tests

Global Securitization Services LLC, on behalf of CCP III, is not permitted to instruct the issuing and paying agent (IPA) to issue any note if:

• A loan event of default or CP event of default exists;
• Notes are required to be registered under the Securities Act;
• The Loan A U.S. and Reg S commercial paper notes exceed maturity dates of 270 days, the Loan B U.S. commercial paper notes exceed the maturity date of 397 days, and the Loan B Reg S commercial paper notes exceed the maturity date of 364 days;
• The issuing and paying agency agreement or loan documents are not in effect;
• The aggregate unpaid principal amount outstanding on all notes exceeds the program limit;
• The aggregate face amount of notes exceeds the principal amount of advances plus interest amounts for all loans;
• The issuer is required to be registered as an "investment company"; and
• The borrower receives an order from the Bank of England under the Banking Act.

Program wind-down events

There are several events that would cause CCP III to stop issuing the ABCP notes. These events include:

• An event of default under the loan agreement;
• A failure of CCP III to pay principal and interest when due; and
• A CCP III insolvency.

Waterfall/payment priority

The security trustee can disburse proceeds from collections for Loan A and Loan B in the following order of priority:

• Amounts to IPA and then interest due on any outstanding notes; then
• Principal due on any outstanding notes; then
• Pay to borrower any investment earnings credited to transaction accounts; then
• Pay any secured expenses due and payable to secured parties; then
• Pay all other secured obligations to secured parties; then
• Pay indemnified amounts owing to any indemnified parties.

Post-default waterfall/payment priority

The security trustee can disburse proceeds from collections for Loan A and Loan B in the following order of priority:

• Pay pari passu and pro rata fees, costs, expenses, indemnity payments to IPA and other parties; then
• Interest or discount due on any outstanding notes; then
• Principal due on any outstanding notes; then
• Pay all other secured obligations to secured parties; then
• Pay indemnified amounts owing to any indemnified parties; then
• Pay any amounts due from CCP III to the borrower; then
• Any surplus remaining to CCP III.

Operational Risk

Review status

CCP III's notes are fully supported by program-level loan agreements reviewed at the inception of the program. For any amendments to the program documents, S&P Global Ratings will be notified in writing prior to closing.

Administrator review

The program administrator's and sub-administrator's experience and past performance are factors in the ratings process. S&P Global Ratings conducts administrator business reviews to evaluate Global Securitization Services LLC's and JPMorgan Chase Bank N.A.'s ability to carry out responsibilities under the program documents, such as:

• Arranging for the issuer to enter into or become bound by the loan agreements and the other transaction documents;
• Maintaining ongoing surveillance of loan agreements;
• Maintaining and administering the issuance and maturity of ABCP; and
• Ensuring the amounts under the loan agreements are sufficient to repay ABCP holders on a timely basis.

Based on the outcome of the reviews and ongoing communications with Global Securitization Services LLC and JPMorgan Chase Bank N.A., we are satisfied that both entities are capable of carrying out their responsibilities under the program documents.

Surveillance

The ratings on all support providers in CCP III are 'A-1+ (sf)'. 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

• Global Asset-Backed Commercial Paper Methodology And Assumptions, March 22, 2024
• Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
• 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
• Counterparty Risk Framework: Methodology And Assumptions, March 8, 2019
• Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014
• Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012
• Principles Of Credit Ratings, Feb. 16, 2011

Related Research

• The Role Of Management Reviews And Surveillance In Rating ABCP Issued By Conduits, March 22, 2024
• 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