DBRS Upgrades Ontrea Inc. (Lime Ridge Mall) to AA, Stable

DBRS has today upgraded the $181 million 5.317% First Mortgage Bonds (the Bonds) of Ontrea Inc. (the Issuer) secured by Lime Ridge Mall (Lime Ridge or the Shopping Centre) to AA from A (low), with a Stable trend.

This action removes the Bonds’ rating of Under Review with Developing implications, where it was placed on October 3, 2013, following the release of DBRS’s updated version of its corporate finance methodology “Rating Entities in the Real Estate Industry,” which included a new appendix entitled “Property Financing (First Mortgage Bonds)” (see press release dated October 3, 2013).

The appendix introduced new legal and structural criteria for first mortgage bond financing, primarily focusing on whether or not the debt rating of the issuer (regardless of what legal form the issuer takes) could be linked to the debt rating of the owner of the issuer. This would occur if the issuer is not properly ring-fenced from the bankruptcy risk of its owner through a special-purpose vehicle (SPV).

DBRS notes that Lime Ridge and the Bonds are not held in a SPV, but are held by the Issuer. As the Bonds are direct obligations of the Issuer, the rating upgrade reflects the probability of an event of default at the Issuer level, despite the fact that recourse for the Bonds is limited to the Shopping Centre. There is, however, full recourse with respect to certain conduct, such as fraud, material misrepresentation or misapplication by the Issuer of funds, such as insurance proceeds and rents.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

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

The applicable methodology is Rating Entities in the Real Estate Industry, which can be found on our website under Methodologies.