DBRS Confirms Reopening of Canada Housing Trust™ No. 1 Series 46 Notes at AAA

DBRS notes that Canada Housing Trust™ No. 1 (the Trust) has re-opened the 2.05% Canada Mortgage Bonds™ Series 46 (the Bonds) by issuing additional Bonds. DBRS has confirmed the rating of the additional Bonds at AAA with a Stable trend. The additional Bonds will be issued in a principal amount of $5 billion (with a total Bonds issuance size of $10 billion) and will mature on June 15, 2017 (the Final Maturity Date). The structural features of the additional Bonds are identical to those of the outstanding Bonds that were issued by the Trust in March 2012. Interest on the Bonds will be paid semi-annually in arrears on June 15 and December 15 of each year until the Final Maturity Date, when the final interest and repayment of 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 an 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 issuers (the Approved Issuers) under the National Housing Act (NHA MBS) and that meet certain eligibility criteria (the Trust Assets). The Approved Issuers will deposit the NHA-MBS payment amounts into a designated account from which the NHA MBS central payor and transfer agent will then make payments to holders of NHA MBS, including the Trust. The Trust will then use the cash flows received from the 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 in the event 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.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

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