Rationale

The 'A-1+ (sf)' ratings assigned to the ABCP issued by Bedford Row Funding Corp. are primarily based on:

• The full credit and liquidity support provided via a collateral transfer agreement.
• Interest rate risk is covered because Royal Bank of Canada (RBC), as liquidity provider, pays for interest accrued and to accrue to the maturity of the notes.
• Support providers rated 'A-1+' that provide liquidity or indemnification support for any interest rate shortfalls.
• Structural protections to ensure the bankruptcy-remote structure of Bedford Row.
• The experience and ability of RBC as program administrator to carry out day-to-day operational services to Bedford Row, such as administering and monitoring the maturity of ABCP and drawing on liquidity and the credit facility to repay ABCP on a timely basis.

Environmental, Social, And Governance (ESG)

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 (https://www.spglobal.com/ratings/en/products-benefits/products/esg-in-credit-ratings#sector-report-cards).

Program Structure

The chart below shows an overview of the program structure.

Chart 1

Key Features

Bedford Row is established to issue U.S. dollar-denominated ABCP notes that can be issued at a discount or bear interest at a fixed or floating rate with maturities of up to 360 days. The proceeds of the ABCP issuance will be used to make loans to RBC and/or its designated affiliates as borrowers. These loans will be secured by interests in securities and financial assets agreed to by the issuer and the borrowers. The securities and financial assets will be pledged as the underlying collateral and held by Bank of New York Mellon as the third-party custodian.

Bedford Row may issue standard, callable, puttable, or extendible ABCP notes. The callable notes may be redeemed in whole or in part at the option of the administrator on behalf of Bedford Row. 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, Bedford Row 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 holders. 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, Bedford Row 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. For Extendible ABCP, the holder has the option to extend the expected maturity date by providing written notice of its election. Upon each extension by the noteholder, the note is required to be paid by Bedford Row on its extended maturity date in an amount equal to principal and interest or discount (as applicable), accrued up to the extended maturity date.

Program Overview

Counterparty/Credit Quality

Liquidity support

RBC provides liquidity support via the collateral transfer agreement. Liquidity funds for the face amount of ABCP in the event that Bedford Row provides notice. Assets funded in Bedford Row typically include eligible securities, which includes government securities and financial assets.

Credit support

All transactions in Bedford Row are fully supported by a liquidity agreement covering all related credit risk.

Interest rate protection

Bedford Row has the ability to issue floating-rate ABCP. Any increase in the floating-rate due on the ABCP is indemnified by RBC.

Clawback/preference risk

Preference risk relating to payments made by RBC is reflected in the rating on the liquidity provider.

Cash Flow And Payment Structure

Liability issuance tests

The conditions necessary for Bedford Row to issue ABCP include:

• There must be no occurrence of an event of default.
• The principal and interest on outstanding ABCP notes and outstanding advances shall not exceed the loan repayment amount and eligible securities.
• The ABCP notes shall be rated at least 'A-1' by S&P Global Ratings.
• ABCP notes shall mature no later than 15 business days prior to the termination of the administrative agreement.
• Issuance of puttable notes shall not exceed 25% of the aggregate face amount of all the ABCP notes.
• The aggregate principal component of ABCP notes shall not exceed the aggregate loan amounts of the loans which are maturing on or after the maturity of the latest ABCP notes.

Conduit wind-down events

Bedford Row has a number of events outlined in the program documents that would lead to a program wind-down, which include:

• Bedford Row's payment failure of principal and interest obligations on any notes when due.
• The insolvency of Bedford Row.
• The inability of Bedford Row to perform any of its obligations under program documents.
• Any material representations and warranties related to the issuer under program documents prove to be incorrect.
• The support provider fails to pay the principal and interest amount of CP notes or advances made to fund the loans in excess of $100,000.
• The liquidity agreement for any reason ceases to be in full force or be declared null or void.
• Trustee not having valid first-priority perfected security interest in the collateral.

Waterfall

The collateral trustee can disburse proceeds from collected funds in the following order of priority:

• Amount required to reimburse itself for any advances made on the notes when due.
• Payment of interest on the notes and advances on a pro rata basis.
• Payment of any matured notes and advances that are due and payable on a pro rata basis.
• Fees to collateral trustee and the custodian.

Post-default waterfall

The collateral trustee can disburse proceeds from collections in the following order of priority:

• Pay fees to collateral trustee and the custodian on a pro rata basis;
• Pay interest on the advances and notes to the support provider and noteholders on a pro rata basis;
• Pay the advances and the principal amount on notes to the support provider and noteholders on a pro rata basis;
• Pay any unpaid fees and expenses to the support provider;
• Pay any unreimbursed principal and interest amount of CP notes or advances to RBC in connection with an event of default only until the Bank of New York Mellon releases its security interest in the loan and liquidity agreements; and
• Pay any unpaid fees to the placement and administrative agent.

Operational Risk

Review status

Any amendments to the program documents will be reviewed prior to closing by S&P Global Ratings.

Administrator review

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

• Originating and structuring new receivables pools;
• Maintaining ongoing surveillance of liquidity facility providers;
• Maintaining and administering the issuance and maturity of ABCP; and
• Drawing liquidity facilities as necessary to repay ABCP holders on a timely basis.

Based on the outcome of the reviews and ongoing communications with RBC, we are satisfied that it can carry out its responsibilities under conduit's program documents.

Surveillance

The ratings on all support providers for Bedford Row are 'A-1+' or higher. 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, which 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
• Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology And Assumptions, March 8, 2019
• Legal Criteria: Structured Finance: Asset Isolation And Special-Purpose Entity Methodology, March 29, 2017
• 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 | General: Criteria Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012
• General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012
• 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