On Dec. 13, 2023, S&P Global Ratings published a request for comment (RFC) on its proposed updated criteria for global asset-backed commercial paper (see "Request For Comment: Global Asset-Backed Commercial Paper Methodology And Assumptions"). Following feedback from market participants, we finalized and published "Global Asset-Backed Commercial Paper Methodology And Assumptions" on March 22, 2024.

We'd like to thank the market participants who provided feedback. This RFC process summary provides an overview of the external written comments and certain other feedback we received from the market on the proposed criteria, the significant analytical changes--if any--we made following the RFC period, and the rationale for those changes.

External Written Comments Received From Market Participants That Led To Significant Analytical Changes To The Final Criteria

We didn't receive any external written comments from market participants that led to significant analytical changes to the criteria.

External Written Comments Received From Market Participants That Did Not Lead To Significant Analytical Changes To The Final Criteria

Feedback:  One commenter noted that no new Federal Family Education Loan Program (FFELP) student loans have been originated since 2010, suggesting that we should remove the reference to FFELP in the listing of assets classes eligible for post review and instead just refer to student loans in general.

Response:  Although there have indeed been no new originations under FFELP, we have seen various instances where existing transactions were refinanced, with the refinancing transactions added to conduits. In addition, we don't consider student loans originated by originators other than FFELP to be eligible for post review. Therefore, we kept the reference to FFELP but clarified that this also includes refinancings.

Feedback:  One market participant commented that the reference to only the trustee in the risk-mitigation discussed for collateral commingling risk in match-funded ABCP is too restrictive, as other parties might also hold collateral.

Response:  We agree and clarified that the trustee is an example of one such counterparty.

Feedback:  A market participant noted that in the section discussing the determination of the pool-specific enhancement and the borrowing base, it should be made clear that "no new ABCP is issued" refers to a particular transaction and not the conduit as a whole.

Response:  Our current wording states that the stop of ABCP issuance is against the respective pool. Therefore, we believe the criteria already make this point.

Feedback:  One commenter suggested that the term "senior" should be removed from the "Liquidity facility agreement" section of Appendix A.

Response:  We believe this term is needed, as it refers to payments that are to be paid in the waterfall prior to paying ABCP principal and interest (payments that are "senior" to those). We clarified the wording by adding that we expect the amount to "also" cover such senior payments.

Feedback:  A market participant commented on the maturity limitation of the ABCP when determining the applicable threshold when calculating program-wide credit enhancement (PWCE). It was suggested that we use the maximum current remaining maturity of all outstanding ABCP in a given conduit rather than the maximum initial maturity as specified in the transaction documentation. This proposal is based on the observation that in terms of the risk investors take at any point in time, the remaining (actual) maturity is more relevant than the (longer) initial maturity.

Response:  We agree that the risk for the investors is driven by--among other factors--the remaining outstanding maturity of the ABCP. Using the maximum maturity, as provided under the transaction documents, for the determination of the applicable threshold allows for stable PWCE calculations. However, the maximum remaining maturity of outstanding ABCP is a dynamic and volatile figure that depends on the actual issuance activity of the conduit. Using the maximum remaining maturity would, in our view, create the potential for volatile PWCE determinations, limiting the possibility to check compliance of a given conduit with the PWCE requirement at each point in time.

Feedback:  We received one comment stating that the proposal is unclear as to impact of the key changes.

Response:  We do state our expected impact on outstanding ratings, which in this case is no impact. In addition, we added further background on how the new treatment of 'AAA' exposures in the analysis of PWCE could affect the calculation of the projected portfolio loss amounts.

Feedback:  A market participant commented that it would be helpful to give context and reasoning on the use of either a 0% or 75% liquidity enhanced recovery rate in the calculation of PWCE.

Response:  When a transaction represents the senior-most interest and we've analyzed the underlying assets, we use a 75% liquidity-enhanced recovery rate when calculating PWCE if the credit quality of the exposure is at least commensurate with the ABCP rating (or subject to a LECA) and the liquidity funds for nondefaulted assets. When we haven't analyzed the underlying assets--because, for example, the analysis was based on a guarantee provider rather than the assets themselves, the exposure is subordinated to other, more senior interests, or the credit quality isn't commensurate with the ABCP rating--we assume a total loss and apply a 0% recovery rate when calculating PWCE. We added these examples for the use of a 0% recovery rate to the criteria to provide further context.

Feedback:  One commenter felt it was unclear how the form and amount of the liquidity facilities provided in ABCP conduits are factored in the PWCE analysis and therefore are considered in the sizing of the required amount of PWCE.

Response:  For the PWCE calculation, the key input is the credit risk of the exposures, not the specifics of the liquidity provided. In the case of a LECA, the corresponding asset credit analysis already takes the type of liquidity into account, including features like long- and short-tail structures. Therefore, we don't make any additional distinction among different types of liquidity structures when determining the liquidity-enhanced recovery rate that we apply to an asset.

Feedback:  A market participant suggested various changes to the presentation of the criteria, namely replacing Chart 2 and Table 3 with a simpler matrix, adding simple calculation examples for PWCE determination, and including examples that show the exposure differences between short-tail and long-tail structures.

Response:  We see the use of a table and additional charts as an effective way of presenting the assumptions used when calculating the projected portfolio loss amount. We changed the terminology to address potential areas of confusion, restricting the use of the term "applicable" to the "applicable threshold." For the PWCE calculation, rather than saying that PWCE is applicable, we updated the wording to focus on the actual outcome of the PWCE calculation--whether the required PWCE is equal or above zero. The appendix of the criteria article does provide multiple examples with step-by-step calculations for PWCE. We also see Chart 4 adequately visualising the differences in risk exposure between short-tail and long-tail structures.

Significant Analytical Changes To The Final Criteria That Did Not Arise From Market Feedback

We finalized and published the final criteria without making any significant analytical changes that were unrelated to the market feedback we received. We made some clarifications to increase the article's readability.