DBRS Takes Rating Actions on CAN Capital Funding LLC Series 2014-1

DBRS, Inc. (DBRS) has conducted a review of the two outstanding ratings on the CAN Capital Funding LLC Series 2014-1 (CAN Capital or the Company), Series 2014 Notes, Class A and Series 2014 Notes, Class B (the Notes) structured finance asset-backed securities transaction. Of the ratings reviewed, both Class A and Class B were downgraded and removed from Under Review with Negative Implications. Class A was downgraded to BBB (high) (sf) from its current rating of A (sf) and removed from Under Review with Negative Implications. Class B was downgraded to B (high) (sf) from BBB (low) (sf) and removed from Under Review with Negative Implications. The downgrades are based on credit enhancement levels that are not sufficient to cover DBRS’s expected losses at the securities’ previous respective rating levels and now reflect credit enhancement, which DBRS believes is more consistent with the new respective rating levels.

CAN Capital was placed Under Review with Negative Implications on December 2, 2016, after the announcement that the Chief Executive Officer and two other executives of the Company had been put on leave of absence. At the November 2016 payment date, a Rapid Amortization Event had also occurred, as actual overcollateralization levels fell below the required levels for the Notes. A subsequent review of the transaction’s expected performance resulted in the rating actions described above.

The ratings are based on DBRS’s review of the following analytical considerations:
-- Transaction capital structure, ratings and form and sufficiency of available credit enhancement.
-- The transaction parties’ capabilities with regard to servicing.
-- The credit quality of the collateral pool and projected performance.

As of the February 15, 2017 Distribution Date, the outstanding principal balance of the Class A Notes was $69,873,193.93, as reported in the Monthly Servicing Statement for the above referenced transaction. The outstanding principal balance of the Class B Notes was $20,000,000.00, as reported in the Monthly Servicing Statement. As of the February 15, 2017 Distribution Date, the Ending Eligible Aggregate Unamortized Funded Amount of the transaction was $89,201,170.22, as reported in the Monthly Servicing Statement for the above referenced transaction. As such, the Notes currently do not benefit from credit enhancement in the form of overcollateralization.

DBRS conducted the on-site operational update meeting with CAN Capital on February 15, 2017, at the Company’s locations in New York City, New York and Kennesaw, Georgia. In addition, DBRS reviewed the schedule of the expected amortization for the Notes provided by CAN Capital, which included projected collections and write-offs over the remaining life of the collateral pool. DBRS also reviewed pertinent additional information provided by CAN Capital and adjusted its baseline loss expectation for the remaining collateral pool to approximately 14%. DBRS used its DBRS collateralized loan obligation Asset Model to assess the stressed net loss at various rating levels based on this updated baseline loss expectation. In addition, DBRS estimated the breakeven net losses for the pool based on the Company’s projections and additional assumptions with respect to prepayments, loss timing and senior expenses in the transaction. The new ratings for the Notes reflect the updated view of DBRS with respect to the expected performance of the remaining collateral and sufficiency of the credit enhancement available to each class of the Notes.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are the DBRS Master U.S. ABS Surveillance Methodology and Rating for CLOs and CDOs of Large Corporate Credit, which can be found on our website under Methodologies.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

Please see attached appendix for additional information regarding sensitivity of assumptions used in the rating process.

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