DBRS Assigns AAA Rating to OTPP and Provisional Ratings of R-1 (high) to OTFT’s Short-Term Promissory Notes and Commercial Paper Notes

DBRS Limited (DBRS) has today assigned an Issuer Rating of AAA to the Ontario Teachers’ Pension Plan Board (OTPP or the Plan) and provisional ratings of R-1 (high) to the Canadian Short-Term Promissory Notes and U.S. Commercial Paper Notes (collectively, the Notes) being issued by the Ontario Teachers’ Finance Trust (OTFT). The trend on all ratings is Stable. OTFT is a wholly owned financing subsidiary of OTPP. The Notes will have an authorized aggregate limit of $10 billion in Canadian currency or the equivalent thereof in another currency. The provisional ratings on the Notes are supported by the unconditional and irrevocable guarantees provided by OTPP and the Plan’s exceptionally high degree of liquidity.

OTPP manages the defined benefit pension plan for teachers in Ontario. It has a clear legislated framework, substantial net assets, a low recourse debt burden by way of guarantee and a strong investment track record, achieving an average annual return of more than 12% over the last five years. More information on the OTPP and its other financing subsidiary, Cadillac Fairview Finance Trust (CFFT), can be found in the CFFT Rating report (June 24, 2015).

OTPP’s recourse debt remains low at $2.6 billion, or 1.7% of adjusted net assets as reported at December 31, 2014. While full utilization of the short-term borrowing programs is not immediately envisioned, full utilization would result in the recourse debt burden’s rising to 7.5% of adjusted net assets. This remains well below the 10.0% threshold for the AAA rating set out in DBRS’s methodology.

The Notes are unconditionally and irrevocably guaranteed by OTPP and rank pari passu with all other present and future unsecured and unsubordinated obligations of OTFT. Net proceeds of the issuance will be used to make loans or other investments to members of the OTPP group and to retire the maturing debentures of the CFFT.

OTPP maintains a high degree of liquidity, with unencumbered highly liquid assets, as defined by DBRS, well in excess of the 1.5 times requirement set for the R-1 (high) rating outlined in the DBRS Criteria “Commercial Paper Liquidity Support for Non-Bank Issuers.”

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.

The applicable methodologies are Rating Canadian Public Pension Funds & Related Exclusive Asset Managers, DBRS Criteria: Guarantees and Other Forms of Explicit Support, and DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers, which can be found on our website under Methodologies.