DBRS Morningstar Discontinues and Withdraws Certain Ratings on the Tranche Amounts and Muskoka Series 2018-1 Notes Issued by Manitoulin USD Limited

DBRS, Inc. (DBRS Morningstar) discontinued and withdrew its provisional ratings on the Tranche A Amount, Tranche B Amount, and Tranche C Amount (collectively, the Tranche Amounts) of two unexecuted, unfunded financial guarantees with respect to a portfolio of primarily U.S. and Canadian senior secured or senior unsecured loans originated or managed by Bank of Montreal (BMO; rated AA with a Stable trend by DBRS Morningstar) and issued by Manitoulin USD Limited (Manitoulin or the Issuer).

DBRS Morningstar also discontinued its ratings on the Muskoka Series 2018-1 Class B Guarantee Linked Notes (the Class B Notes), the Muskoka Series 2018-1 Class C Guarantee Linked Notes (the Class C Notes), and the Muskoka Series 2018-1 Class D Guarantee Linked Notes (the Class D Notes; together with the Class B Notes and Class C Notes, the Notes) due to repayment. The Notes were issued by Manitoulin referencing the executed Junior Loan Portfolio Financial Guarantee, dated as of September 27, 2018, between Manitoulin as Guarantor and BMO as Beneficiary with respect to a portfolio of primarily U.S. and Canadian senior secured and senior unsecured loans.

RATING RATIONALE
The discontinued—withdrawn rating action of the provisional ratings on the Tranche Amounts follows a rating withdrawal request by the Issuer.

The discontinued—repaid rating action of the ratings on the Notes reflects the full repayment of the Notes issued by Manitoulin.

The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary, “Baseline Macroeconomic Scenarios for Rated Sovereigns: December 2022 Update” (https://www.dbrsmorningstar.com/research/407678), published on December 21, 2022. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020.

For more information regarding DBRS Morningstar’s additional adjustment for select industries related to the coronavirus, please see its May 18, 2020, commentary, “CLO Risk Exposure to the Coronavirus Disease (COVID-19)” at https://www.dbrsmorningstar.com/research/361112.

There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929 (May 17, 2022).

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

The principal methodologies applicable to the ratings are Rating CLOs and CDOs of Large Corporate Credit (February 7, 2023; https://www.dbrsmorningstar.com/research/409498) and Mapping Financial Institution Internal Ratings to DBRS Morningstar Ratings for Global Structured Credit Transactions (February 24, 2022; https://www.dbrsmorningstar.com/research/392873).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.com/about/methodologies.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS
Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report:
https://www.dbrsmorningstar.com/research/384482.

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

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. 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 Morningstar applied the senior secured and senior unsecured recovery rates defined in its Rating CLOs and CDOs of Large Corporate Credit (February 7, 2023; https://www.dbrsmorningstar.com/research/409498) methodology. DBRS Morningstar applies different recovery rates depending on the recovery tier and seniority.

DBRS Morningstar 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 Morningstar relied on either public ratings or a ratings mapping to DBRS Morningstar ratings of BMO’s internal ratings models. The mapping was completed in accordance with DBRS Morningstar’s Mapping Financial Institution Internal Ratings to DBRS Morningstar Ratings for Global Structured Credit Transactions (February 17, 2023; https://www.dbrsmorningstar.com/research/410076) methodology.

The last rating action on this transaction took place on October 7, 2022, when the Notes were confirmed and the Tranche Amounts were Provisional-Confirmed.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

Lead Analyst: Oxana Rhybak, Vice President, Credit Ratings - US Structured Credit
Rating Committee Chair: Jerry van Koolbergen, Managing Director, Head of US Structured Credit
Initial Rating Date: September 24, 2018

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The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- Rating CLOs and CDOs of Large Corporate Credit and DBRS Morningstar CLO Asset Model Version 2.3.1
(February 7, 2023)
www.dbrsmorningstar.com/research/409498

-- Mapping Financial Institution Internal Ratings to DBRS Morningstar Ratings for Global Structured Credit Transactions (February 17, 2023)
https://www.dbrsmorningstar.com/research/410076

-- Cash Flow Assumptions for Corporate Credit Securitizations (February 7, 2023)
www.dbrsmorningstar.com/research/409499

-- Legal Criteria for U.S. Structured Finance (December 7, 2022)
https://www.dbrsmorningstar.com/research/407008

-- Operational Risk Assessment for Collateralized Loan Obligation (CLO) and Collateralized Debt Obligation (CDO) Managers of Large Corporate Credits (September 23, 2022)
https://www.dbrsmorningstar.com/research/403042

-- Interest Rate Stresses for U.S. Structured Finance Transactions (August 30, 2022)
https://www.dbrsmorningstar.com/research/402153

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].