Ratings agency DBRS says it is maintaining the ratings of Foundation Trust as being “Under Review with Developing Implications”, after it learned that its liquidity provider has not joined the consortium designed to ensure liquidity in the asset-backed commercial paper market.

DBRS says that Foundation was placed under review on August 16. And, on the same day, DBRS received notification that Foundation was part of the consortium created by banks, asset providers and major investors to take significant steps to establish “normal operations in the Canadian Third Party ABCP market.”

“However, since that time, DBRS has become aware that the sole liquidity provider facing Foundation has not joined the consortium and has not indicated it plans to do so,” it says.

As a result, the sponsor for Foundation Trust also indicated it did not consider Foundation to be an affected trust under that agreement, and the institutional investor representatives in the consortium indicated that Foundation should not be included.

DBRS said that Foundation has been unable to fund maturing ABCP since August 16. “Should this continue unremedied, noteholders or the indenture trustee for Foundation could initiate default proceedings, which would lead to negative ratings action,” it said.

“Under this scenario, after the expiry of any applicable grace periods, there could be a liquidation of the underlying assets,” DBRS explained.

The rating agency said it believes that the credit quality of the underlying assets (100% auto receivables) continues to be high. “The receivables themselves have a considerable amount of liquidity and amortize over time,” it concludes. “DBRS continues to monitor the situation and will issue additional comments as the situation develops.”