DBRS Confirms CBC Monetization Trust Notes at AAA (sf)

As part of DBRS’s continued effort to provide market participants with updates on an annual basis, DBRS has confirmed the rating of the fixed-rate, fully amortizing CBC Monetization Trust Notes (the Notes) at AAA (sf).

The rating is based on the following factors:
(1) The unconditional and irrevocable guarantee by Canadian Broadcasting Corporation (CBC) of payments due to the CBC Monetization Trust (the Trust) under the Receivables.
(2) The Support Agreement whereby CBC has agreed to support the Trust for all operating costs and any tax liabilities.
(3) The status of CBC as an Agent of Her Majesty in Right of Canada (the Crown) means that CBC’s obligations under the CBC Guarantee and the Support Agreement carry the full faith and credit of the Crown.

The Trust is a special-purpose vehicle established under the laws of Ontario pursuant to a Declaration of Trust. The Trust has been established in order to monetize four receivables related to previous sales and leases entered into by CBC with respect to land adjacent to the CBC Broadcasting Centre in Toronto. The Trust’s powers and business activities have been restricted to those necessary to carry out the monetization transaction.

Funding for the Trust has been provided by the issuance of $135.7 million of Notes on December 23, 2009. The current amount of notes outstanding (as of January 31, 2011) is $128,132,199. The Notes are fully amortizing notes that pay a blend of interest and principal in arrears on a semi-annual basis. Net proceeds from the sale of the Notes have been paid to the Seller in consideration for the purchase of two Promissory Notes and as payment of pre-paid rent under the Concurrent Lease and as a guarantee fee. The Receivables originated by CBC have been legally transferred from CBC to the Trust by way of the Note Purchase Agreement (for the Promissory Notes) and the Concurrent Lease (for the Land Leases), as evidenced by opinions provided by the Seller’s counsel.

PROMISSORY NOTES: In June 2003, CBC sold two parcels of land to Ontrea Inc. (Ontrea), a wholly owned subsidiary of the Ontario Teachers’ Pension Plan Board (OTPPB). Part of the consideration for the land was paid by way of two Promissory Notes issued by Ontrea to the CBC. The Promissory Notes are fully amortizing, pay principal and interest monthly and mature on May 1, 2027. Outstanding balances on the two Promissory Notes as of January 31, 2011, were $48,878,262 and $5,055,174. All of CBC’s right, title and interest in and to the Promissory Notes have been conveyed to the Trust pursuant to the terms of a Note Purchase Agreement.

LAND LEASES: CBC as lessor has entered into two Land Leases with respect to two properties adjacent to the CBC Broadcasting Centre in Toronto. The first Land Lease has been entered into with two tenants in common, an Ontario numbered company that is a wholly owned subsidiary of the Workplace Safety and Insurance Board and Simcoe Front Developments Limited as nominee of Cadillac Fairview Corporation Ltd., a wholly owned subsidiary of the OTPPB. The second Land Lease is with Simcoe Front Developments Limited as nominee of Cadillac Fairview Corporation Ltd. The Trust has entered into a Concurrent Lease with CBC whereby the Trust concurrently leases from CBC the lands, buildings and other property leased under the Land Leases. According to the terms of the Concurrent Lease, the Trust has succeeded to all rights of CBC for rent payments under the Land Leases and as sub-landlord has become entitled to receive all payments for rent owing under the Land Leases.

All payments received under the Receivables will be held in the Trust Account in the name of the Trust and will not be commingled with other funds of CBC.

SUPPORT AGREEMENT: CBC has entered into a Support Agreement with the Trust to provide support for any and all operating costs of the Trust and for any tax liability that may arise. If the Trust is unable to pay any of its obligations, other than its obligations to pay principal and interest on the Notes, CBC has unconditionally and irrevocably agreed to provide the Trust with any funds necessary to allow the Trust to meet its obligations in full. The status of CBC as an Agent of Her Majesty in Right of Canada means that CBC’s obligations under the Support Agreement carry the full faith and credit of the Crown.

SERVICER: The Trust has contracted CBC to service the Receivables. CBC may be removed and replaced as Servicer by the Trust in the following circumstances:
-- Failure by CBC to pay or deposit any amounts to be paid or deposited under the Note Purchase Agreement or Concurrent Lease within two business days of being due.
-- Failure by CBC, as Servicer, to perform or observe any term, condition or covenant set forth in the Note Purchase Agreement or Concurrent Lease that could be expected to have a material adverse effect and continues unremedied for a period of 30 days.
-- Any representation, warranty or statement given by CBC under the Note Purchase Agreement or Concurrent Lease that was incorrect when made and such incorrectness has a material adverse effect and continues unremedied for a period of 30 days.

THE NOTES: The Notes pay a blend of principal and interest on a semi-annual basis in arrears, commencing on May 15, 2010, and continuing until and including the maturity date, May 15, 2027. As security for the Notes, the Trust has granted the Indenture Trustee a security interest in all the Collateral. The Collateral consists of all the assets of the Trust, including the Promissory Notes, the Concurrent Lease, the CBC Guarantee, the Support Agreement and the Trust Account established in the name of the Trust.

CREDIT ENHANCEMENT: Credit enhancement is provided by overcollateralization of the Notes, excess spread generated by the Receivables and the CBC Guarantee, as described below. CBC has executed the CBC Guarantee in favour of the Trust whereby CBC has unconditionally and irrevocably guaranteed the full and timely payment of the Receivables by the underlying obligors. The status of CBC as an Agent of Her Majesty in Right of Canada means that CBC’s obligations under the CBC Guarantee carry the full faith and credit of the Crown. An Order in Council has been passed and appropriate statutory amendments have been made in connection with the CBC Guarantee.

For more detailed information on the transaction structure, please refer to the March 25, 2010, rating report of the Trust at www.dbrs.com.

The performance and characteristics of the pool and the Notes are available and updated each month in the Monthly Canadian ABS Report available at www.dbrs.com.

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

The applicable methodology is Canadian Structured Finance Flow-Through Ratings Methodology, which is available on our website under Methodologies.