DBRS Assigns Provisional Ratings to Certain Tranche Amounts of Manitoulin USD Ltd., Algonquin 2019-1

DBRS, Inc. (DBRS) assigned the following provisional ratings to the Tranche A Amount, Tranche B Amount, Tranche C Amount and Tranche D Amount (collectively, the Tranche Amounts) of two unexecuted, unfunded financial guarantees (the Financial Guarantees) of Manitoulin USD Ltd., Algonquin 2019-1 with respect to a portfolio of primarily U.S. and Canadian senior secured and senior unsecured loans originated or managed by the Bank of Montreal (BMO; rated AA with a Stable trend by DBRS):

-- Tranche A Amount at AAA (sf)
-- Tranche B Amount at AA (sf)
-- Tranche C Amount at A (sf)
-- Tranche D Amount at BBB (low) (sf)

The provisional ratings on the Tranche Amounts address the likelihood of a reduction to the respective Tranche Amounts due to a Tranche Loss Balance on each respective tranche resulting from defaults and losses within the guaranteed portfolio during the period from the Effective Date until the Scheduled Termination Date (as defined in the Financial Guarantees referenced above).

The ratings assigned by DBRS are expected to remain provisional until the underlying agreements are executed. BMO may have no intention of executing the Financial Guarantees. DBRS will maintain and monitor the provisional ratings throughout the life of the transaction or while it continues to receive performance information.

To assess portfolio credit quality, DBRS may provide a credit estimate, internal assessment or ratings mapping of the Beneficiary’s internal ratings model for each corporate obligor in the portfolio. 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 a facility sufficient to assess portfolio credit quality.

The ratings reflect the following:

(1) The draft Financial Guarantees.
(2) The integrity of the transaction structure.
(3) DBRS’s assessment of the portfolio quality.
(4) Adequate credit enhancement to withstand projected collateral loss rates.

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.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

This rating included participation by the rated entity or any related third party. DBRS had access to accounts, management and other relevant internal documents for the rated entity or a related third party.

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: Joseph Priolo, Senior Vice President, U.S. Structured Credit
Rating Committee Chair: Jerry van Koolbergen, Managing Director, U.S. Structured Credit
Initial Rating Date: July 22, 2019

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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