Morningstar DBRS Downgrades Credit Ratings on the Laurentian Bank of Canada Legislative Covered Bonds to AA (high)

DBRS Limited (Morningstar DBRS) downgraded its credit ratings on the following outstanding series (the Covered Bonds) issued under the Laurentian Bank of Canada (Legislative Covered Bond Programme) (the Program) to AA (high) from AAA.

-- Covered Bonds, Series CBL1
-- Covered Bonds, Series CBL2

Morningstar DBRS downgraded the credit ratings on the Covered Bonds, following the downgrade of Laurentian Bank of Canada's (LBC's) Long-Term Senior Debt Rating of BBB (high) with a Negative trend to BBB with a Stable trend. The Long-Term Senior Debt rating of LBC is the basis for the Covered Bond Attachment Point (CBAP).

Note that given the Program's CBAP of BBB and Legal and Structuring Framework (LSF) assessment of Strong, the highest achievable covered bond rating is AA (high). Therefore, LBC concurrently decreased the Program Overcollateralization (OC) to 16% where the Cover Pool Credit Assessment (CPCA) is AA, the minimum required to achieve a AA (high) covered bond rating.

The downgrade of the credit ratings on the Covered Bonds to AA (high) is based on the following considerations:

-- A CBAP reflects the credit strength of the Reference Entity (RE) as the source of payment for the Program. The CBAP is now at BBB, which is the Long-Term Senior Debt rating of LBC. LBC is the RE for the Program.
-- A LSF assessment of Strong associated with the Program.
-- A CPCA of AA.
-- An LSF-Implied Likelihood (LSF-L) of AA (low).
-- A two-notch uplift from the LSF-L for high recovery prospects to achieve the AA (high) rating. Based on the recovery notching scale, an uplift of up to two notches from the LSF-L is possible.
-- A level of OC of 16.0% (based on the Asset Percentage of 86.2%) to which Morningstar DBRS gives credit.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS 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.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

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

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology applicable to the credit ratings is Global Methodology for Rating and Monitoring Covered Bonds (April 02, 2024) https://dbrs.morningstar.com/research/430636.

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

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 under Related Documents or by contacting us at info-DBRS@morningstar.com.

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.

Morningstar DBRS 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.

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

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

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

Legal and Derivatives Criteria for Canadian Structured Finance (August 12, 2024)
https://dbrs.morningstar.com/research/437761

Operational Risk Assessments for Canadian Structured Finance (August 06, 2024)
https://dbrs.morningstar.com/research/437547

DBRS Canadian RMBS Model 5.0.1.1
https://dbrs.morningstar.com/models/

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/410863.

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