DBRS Upgrades Ratings on the Series 2017-2 Notes Issued by Muskoka USD Limited 2017-2

DBRS, Inc. (DBRS) upgraded the ratings on the Series 2017-2 Class A Guarantee Linked Notes (the Class A Notes) to AAA (sf) from AA (sf), the Series 2017-2 Class B Guarantee Linked Notes (the Class B Notes) to AA (low) (sf) from A (sf) and the Series 2017-2 Class C Guarantee Linked Notes to BBB (sf) from BBB (low) (sf) (the Class C Notes; together with the Class A Notes and Class B Notes, the Notes) issued by Muskoka USD Limited (Muskoka or the Issuer), referencing the Loan Portfolio Financial Guarantee (the Financial Guarantee) dated as of September 28, 2017, between Muskoka as Guarantor and the Bank of Montreal (rated AA with Stable trend by DBRS) as Beneficiary with respect to a portfolio of primarily U.S. and Canadian senior secured and senior unsecured loans.

The ratings on the Notes address the timely payment of interest and ultimate payment of principal on or before the Scheduled Termination Date (as defined in the Financial Guarantee referenced above). The payment of the interest due on the Notes is subject to the Beneficiary’s ability to pay the Guarantee Fee Amount (as defined in the Financial Guarantee referenced above).

To assess portfolio credit quality, for each corporate obligor in the portfolio, DBRS relies on DBRS ratings and public ratings from other rating agencies, or DBRS may provide a credit estimate, internal assessment or ratings mapping of the Beneficiary’s internal ratings model. Credit estimates, internal assessments and ratings mappings are not ratings; rather, they represent an abbreviated analysis, including model-driven or statistical components of default probability for each obligor that is used in assigning a rating to the facility sufficient to assess portfolio credit quality.

On the Effective Date (as defined in the Financial Guarantee referenced above), the Issuer utilized the proceeds of the issue of the Class A Notes and Class E Notes to make a deposit into the Class A and Class E Cash Deposit Accounts and utilized the proceeds of the issue of the Class B Notes, the Class C Notes and the Class D Notes to make a deposit into the Class B, C and D Cash Deposit Accounts (together, the Cash Deposit Banks). DBRS may review the ratings on the Notes in the event of a downgrade of the Cash Deposit Banks below certain thresholds, as defined in the transaction documents.

Following the delivery of an Enforcement Notice (as defined in the Terms and Conditions of the Notes), amounts payable will be applied in accordance with the Post-Enforcement Priority of Payments (as defined in the Terms and Conditions of the Notes), which could affect DBRS’s ratings of the Notes at that time.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodologies are Rating CLOs and CDOs of Large Corporate Credit and Mapping Financial Institution Internal Ratings to DBRS Ratings for Global Structured Credit Transactions, which can be found on dbrs.com under Methodologies & Criteria.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

This rating is endorsed by DBRS Ratings Limited for use in the European Union. The following additional regulatory disclosures apply to endorsed ratings:

Each of the principal asset class methodologies employed in the analysis addressed one or more particular risks or aspects of the rating and were factored into the rating decision; specifically, for the recovery rate, DBRS applied the senior secured and senior unsecured recovery rates defined in its “Rating CLOs and CDOs of Large Corporate Credit” methodology. DBRS applies different recovery rates depending on the recovery tier and seniority.

DBRS used its CLO Asset Model to determine expected default rates for the portfolio at each rating level. To determine the credit risk of each underlying reference obligation, DBRS relied on either public ratings or a ratings mapping to DBRS ratings of the Bank of Montreal’s internal ratings models. The mapping was completed in accordance with DBRS’s “Mapping Financial Institution Internal Ratings to DBRS Ratings for Global Structured Credit Transactions” methodology.

The last rating action on this transaction took place on September 28, 2018, when DBRS confirmed the ratings.

For further information on DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Lead Analyst: Quan Yoon, Assistant Vice President, U.S. Structured Credit
Rating Committee Chair: Jerry van Koolbergen, Managing Director, Head of U.S. Structured Credit
Initial Rating Date: September 26, 2017

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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