DBRS Rates Canada Housing Trust™ No. 1 Series 42 Notes at AAA

DBRS has today assigned a rating of AAA to the Floating Rate Canada Mortgage Bonds™ Series 42 (the Bonds) issued by Canada Housing Trust™ No. 1 (the Trust). The Bonds will be issued in a principal amount of $2.5 billion and will mature on September 15, 2016 (the Final Maturity Date). Interest on the Bonds will be paid quarterly in arrears on June 15, September 15, December 15 and March 15 of each year at a rate equal to the three-month Canadian Dealer Offered Rate (CDOR) for Canadian-dollar banker’s acceptances plus five basis points until the Final Maturity Date, when the final interest and repayment of the principal will be due.

The Bonds are backed by a full guarantee (the CMHC Guarantee) provided by Canada Mortgage and Housing Corporation (CMHC) in its capacity as agent of 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 AAA rating is based solely on the CMHC Guarantee, without any review of the underlying collateral as such information is not provided to DBRS.

The proceeds from this issuance of the 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 ensures timely payment to Bondholders in the event that the Trust has insufficient funds to meet its expenses. As a result, the Trust will grant 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.

The applicable methodologies are Rating Sovereign Governments and Canadian Structured Finance Flow-Through Ratings, which can be found on our website under Methodologies.