Press Release

DBRS Morningstar Assigns Provisional Ratings to the Tranche Amounts of Granville USD Ltd.

Structured Credit
July 27, 2023

DBRS, Inc. (DBRS Morningstar) assigned the following provisional ratings to the Tranche A1, the Tranche A2, the Tranche B1, the Tranche B2, the Tranche C1, and the Tranche C2 (collectively, the Tranche Amounts) of Granville USD Ltd., pursuant to Schedule 2 of the Financial Guarantee, dated as of July 27, 2023, entered into between Granville USD Ltd., as Guarantor, and The Bank of Nova Scotia (rated AA with a Stable trend by DBRS Morningstar), as Beneficiary, with respect to certain issued credit-linked notes (the Notes) referencing a portfolio of primarily U.S. and Canadian senior unsecured and senior secured loans originated or managed by The Bank of Nova Scotia:

-- Tranche A1 at AAA (sf)
-- Tranche A2 at AAA (sf)
-- Tranche B1 at AA (high) (sf)
-- Tranche B2 at AA (low) (sf)
-- Tranche C1 at A (high) (sf)
-- Tranche C2 at A (low) (sf)

The provisional ratings on the Tranche Amounts address the likelihood of a reduction to the respective Tranche Amounts resulting from obligor defaults within the guaranteed portfolio during the period from the Effective Date until the Scheduled Termination Date (as defined in the Financial Guarantee). For obligors within the guaranteed portfolio, default events are limited to payment default, insolvency, and restructuring events.

The provisional ratings take into consideration only the creditworthiness of the reference portfolio. The ratings do not address counterparty risk nor the likelihood of any event of default or termination events under the agreement occurring.

The Bank of Nova Scotia entered into the Financial Guarantee in respect of certain issued Notes. The Bank of Nova Scotia did not request that DBRS Morningstar assign ratings to the Notes. The payment of principal and interest (the Guarantee Fee Amount, as defined in the Financial Guarantee) on the Notes is subject to additional counterparty credit risk associated with the Beneficiary’s ability to pay such amounts. As a result, if DBRS Morningstar were to rate such Notes, even if they are pari passu with a related Tranche Amount, DBRS Morningstar’s credit ratings on the Notes may be different than the credit ratings assigned to the related Tranche Amounts.

DBRS Morningstar expects its ratings on the Tranche Amounts to remain provisional until there is an executed Financial Guarantee agreement covering the payment obligations and exchange of risk in respect of such Tranche Amounts. The Bank of Nova Scotia may have no intention of executing such a Financial Guarantee. DBRS Morningstar 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 Morningstar may provide a credit estimate, internal assessment, or ratings mapping of The Bank of Nova Scotia’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 a facility sufficient to assess portfolio credit quality.

The provisional ratings are the result of DBRS Morningstar’s review of the transaction structure and the Financial Guarantee of Granville USD Ltd., a corporation established under the Canada Business Corporations Act. Granville USD Ltd. is a synthetic risk transfer transaction with The Bank of Nova Scotia as the Beneficiary.

The ratings reflect the following considerations:

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

DBRS Morningstar analyzed the transaction using its CLO Asset Model, based on certain reference portfolio characteristics, including Eligibility Criteria and Replenishment Criteria, as defined per the Financial Guarantee. The initial reference portfolio consists of well-diversified senior unsecured and senior secured corporate loans across various industries and rating levels. The analysis produced satisfactory results, which supported the provisional ratings on the Tranche Amounts.

DBRS Morningstar’s credit ratings on the Tranche Amounts address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

For more information regarding DBRS Morningstar’s additional adjustment for select industries related to the pandemic, please see its May 18, 2020, commentary, “CLO Risk Exposure to the Coronavirus Disease (COVID-19)” at

The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary “Baseline Macroeconomic Scenarios for Rated Sovereigns: June 2023 Update”, published on June 30, 2023 ( These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020.

There were no Environmental/Social/Governance factors 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 (July 4, 2023).

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

The principal methodologies applicable to the credit ratings are Rating CLOs and CDOs of Large Corporate Credit (February 7, 2023; and Mapping Financial Institution Internal Ratings to DBRS Morningstar Ratings for Global Structured Credit Transactions (February 17, 2023;

Other methodologies referenced in this transaction are listed at the end of this press release.

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:

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

DBRS, Inc.
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New York, NY 10005 USA
Tel. +1 212 806-3277

The credit rating methodologies used in the analysis of this transaction can be found at:

-- Rating CLOs and CDOs of Large Corporate Credit and DBRS Morningstar CLO Asset Model Version (February 7, 2023),

-- Mapping Financial Institution Internal Ratings to DBRS Morningstar Ratings for Global Structured Credit Transactions (February 17, 2023),

-- Cash Flow Assumptions for Corporate Credit Securitizations (February 7, 2023),

-- Operational Risk Assessment for Collateralized Loan Obligation (CLO) and Collateralized Debt Obligation (CDO) Managers of Large Corporate Credits (September 23, 2022),

-- Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023),

-- Legal Criteria for U.S. Structured Finance (December 7, 2022),

A description of how DBRS Morningstar analyzes structured finance transactions and how the methodologies are collectively applied can be found at:

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