Morningstar DBRS Assigns Issuer Rating of AA to University Health Network, Stable Trend

DBRS Limited (Morningstar DBRS) assigned an Issuer Rating of AA with a Stable trend to University Health Network (UHN or the Hospital) and discontinued its credit rating on the Hospital's Secured Bonds following their full repayment.

KEY CREDIT RATING CONSIDERATIONS
The credit rating is supported by Morningstar DBRS' assessment that government support is very strong for UHN. The Hospital is significantly important to the Province of Ontario's (Ontario or the Province; rated AA with a Stable trend) healthcare system, as evidenced by its position as the largest hospital network in Ontario and the largest research hospital in Canada and by the breadth of population it serves. The Hospital benefits from a strong market position and financial metrics, including low debt levels. Additionally, the strong government support would still mitigate any potential weakness arising from UHN's own intrinsic assessment, such as any material weaknesses in the Hospital's competitive position, its debt and liquidity profile, and its financial metrics.

CREDIT RATING DRIVERS
A change in Ontario's credit ratings would lead to a commensurate change in the Hospital's credit rating.

The credit rating would be downgraded if Morningstar DBRS' assessment of government support were to weaken or if UHN were to experience a material deficiency or weakness in its intrinsic assessment, such as a sustained deterioration in its financial performance, without management response.

CREDIT RATING RATIONALE
The Hospital benefits from very strong government support. UHN is a publicly owned and funded hospital and is the largest hospital network in Ontario and Canada; it is known for its specialized medical services and has the largest hospital-based research program in Canada. Patients travel to UHN from across Ontario to receive care that may not be available elsewhere, and a disruption in healthcare services at UHN would be detrimental to a significant share of the provincial population. The Province provides significant funding and strong oversight for the Hospital's operations. The healthcare sector remains a critical priority for Ontario, and the provincial government has a track record of providing additional funding to hospitals when necessary.

For the year ended March 31, 2025, UHN reported a deficit of $31.9 million, a deterioration from the 2023-24 surplus of $19.5 million, as expense growth outpaced that of revenues. UHN continues to target an operating surplus, consistent with prior years, which would allow the Hospital to fund some capital initiatives without the need to draw on other balance sheet resources. The Hospital benefits from low debt levels and does not anticipate an increase in debt over the near term. UHN continues to demonstrate stable and predictable cash flows both in stable government funding and strong internal liquidity and cash management.

Morningstar DBRS assigned the Issuer Rating in line with its application of the "Global Methodology for Rating Public and Not-For-Profit Hospitals and Health Systems." For more information, please visit https://dbrs.morningstar.com/research/444620.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors 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 (May 16, 2025) at https://dbrs.morningstar.com/research/454196.

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

Morningstar DBRS applied the following principal methodology:
-- Global Methodology for Rating Public and Not-For-Profit Hospitals and Health Systems (December 16, 2024),
https://dbrs.morningstar.com/research/444619

Morningstar DBRS credit ratings may use of one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025; https://dbrs.morningstar.com/research/447186), which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodology has also been applied:
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025),
https://dbrs.morningstar.com/research/454196

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

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

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.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS trends and credit ratings are under regular surveillance.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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