DBRS Confirms Reopening of Canada Housing Trust™ No.1 Series 27 Notes at AAA

DBRS notes that Canada Housing Trust™ No.1 (the Trust) has re-opened the Floating Rate Canada Mortgage Bonds™ Series 27 (the Bonds) by issuing additional Bonds. DBRS has confirmed the rating of the additional Bonds at AAA with a Stable trend. The additional Bonds have been issued in a minimum aggregate principal amount of $1,000,000,000 and will mature on September 15, 2014 (the Final Maturity Date). The structural features of the additional Bonds are identical to the outstanding Series 27 bonds issues by the Trust in May 2009. Interest on the Bonds will be paid quarterly in arrears on March 15, June 15, September 15 and December 15 at a rate equal to the three-month Canadian Dollar Offering Rate (CDOR) plus 37 basis points. As the Bonds are bullet maturity bonds, principal will become due and payable on the Final Maturity Date.

The Bonds are backed by a full guarantee (the CMHC Guarantee) provided by the Canada Mortgage Housing Corporation (CMHC), in its capacity as Agent for Her Majesty in Right of Canada. The Bonds are consequently rated at the same level as CMHC’s senior unsecured debt rating of AAA, which mirrors DBRS’s Canadian sovereign rating of AAA for the Government of Canada’s domestic and foreign currency obligations. As an Agent of Her Majesty in Right of Canada, CMHC’s debt obligations and guarantees are direct obligations of the Government of Canada.

The proceeds from this issuance of Bonds will be used by the Trust to acquire insured residential mortgages in the form of pools of mortgage-backed securities that have been created by CMHC-approved lenders (the Approved Lenders), and that meet certain eligibility criteria (the Trust Assets). The Approved Lenders will collect monthly payments from mortgagors and forward them to the Trust, which will then use the cash flows from these high-quality Trust Assets, as well as hedging agreements, to meet its obligations to Bondholders. All hedging counterparties must be approved by CMHC. The CMHC Guarantee will ensure timely payment to Bondholders to the extent that the Trust has insufficient funds to meet its expenses. As a result, the Trust has granted CMHC a first priority security interest in the Trust Assets to the extent of any payments made to Bondholders under the CMHC Guarantee.

Notes:
All figures are in Canadian dollars unless otherwise noted.

Factors considered by DBRS in determining this rating include:
-- The applicability of the CMHC Guarantee.
-- CMHC’s status as an Agent of Her Majesty in Right of Canada.
-- The applicable methodology in rating the Government of Canada is Rating Sovereign Governments, which can be found on our website under Methodologies.

This is a Structured Finance rating.