DBRS Morningstar Finalizes Provisional Ratings on Certain Algonquin Series 2020-1 Notes Issued by Manitoulin USD Ltd.

DBRS, Inc. (DBRS Morningstar) finalized the following provisional ratings on the Algonquin Series 2020-1 Class B Guarantee Linked Notes (the Class B Notes), the Algonquin Series 2020-1 Class C Guarantee Linked Notes (the Class C Notes), and the Algonquin Series 2020-1 Class D Guarantee Linked Notes (the Class D Notes; together, with the Class B Notes and Class C Notes, the Notes) issued by Manitoulin USD Ltd. (Manitoulin or the Issuer) referencing the executed Junior Loan Portfolio Financial Guarantee (the Financial Guarantee) dated January 29, 2020, between Manitoulin as Guarantor and the Bank of Montreal (rated AA with a Stable trend by DBRS Morningstar) as Beneficiary with respect to a portfolio of primarily U.S. and Canadian senior secured and senior unsecured loans:

-- Class B Notes at AA (sf)
-- Class C Notes at A (sf)
-- Class D Notes at BBB (low) (sf)

The ratings on the Notes address the timely payment of interest and ultimate payment of principal on or before the Scheduled Termination Date (as defined in the Financial Guarantee referenced above). The payment of the interest due to the Notes is subject to the Beneficiary’s ability to pay the Guarantee Fee Amount (as defined in the Financial Guarantee referenced above).

To assess portfolio credit quality, DBRS Morningstar 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.

On the Effective Date (as defined in the Financial Guarantee referenced above), the Issuer will use the proceeds of the issue of the Notes to make a deposit into the Cash Deposit Accounts with the Cash Deposit Bank. DBRS Morningstar may review the ratings on the Notes in the event of a downgrade of the Cash Deposit Bank below certain thresholds, as defined in the transaction documents.

The ratings reflect the following:

(1) The Financial Guarantee dated January 29, 2020.
(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 notes that the above press release was amended on April 9, 2020, to remove a disclosure that was not applicable. The amendment was minor and would not impact the understanding of the reader.

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 Morningstar did have 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 Morningstar applied the senior secured and senior unsecured recovery rates defined in its “Rating CLOs and CDOs of Large Corporate Credit” 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 the Bank of Montreal’s internal ratings models. The mapping was completed in accordance with DBRS Morningstar’s “Mapping Financial Institution Internal Ratings to DBRS Ratings for Global Structured Credit Transactions” methodology.

This is the first rating action since the Initial Rating Date.

For further information on DBRS Morningstar 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: January 28, 2020

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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