DBRS Morningstar Updates Ratings on Certain Notes and Tranche Amounts of Manitoulin USD Ltd., Algonquin 2020-1

DBRS, Inc. (DBRS Morningstar) confirmed the rating of AA (sf) on the Algonquin Series 2020-1 Class B Guarantee Linked Notes (the Class B Notes) issued by Manitoulin USD Ltd. (Manitoulin or the Issuer). DBRS Morningstar upgraded the ratings on 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. 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 C Notes to AA (sf) from A (sf)
-- Class D Notes to A (low) (sf) from 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).

DBRS Morningstar also confirmed the ratings of AAA (sf) on the Tranche A Amount and AA (sf) on Tranche B Amount. DBRS Morningstar upgraded the ratings on Tranche C Amount and Tranche D Amount of two unexecuted, unfunded financial guarantees (the Financial Guarantees) of Manitoulin USD Ltd., Algonquin 2020-1 with respect to a portfolio of primarily U.S. and Canadian senior secured and senior unsecured loans originated or managed by the Bank of Montreal (BMO; rated AA with a Stable trend by DBRS Morningstar):

-- Tranche C Amount to AA (sf) from A (sf)
-- Tranche D Amount to A (low) (sf) from BBB (low) (sf)

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 Guarantees 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.

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

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/373262.

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

The principal methodologies are Rating CLOs and CDOs of Large Corporate Credit (January 26, 2022) and Mapping Financial Institution Internal Ratings to DBRS Morningstar Ratings for Global Structured Credit Transactions (March 1, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

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.

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 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” 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” methodology.

The last rating action on this transaction took place on February 10, 2021.

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. 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: Quan Yoon, 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.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

DBRS, Inc.
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New York, NY 10005 USA
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-- Operational Risk Assessment for Collateralized Loan Obligation (CLO) and Collateralized Debt Obligation (CDO) Managers of Large Corporate Credits (September 20, 2021),
https://www.dbrsmorningstar.com/research/384628

-- Interest Rate Stresses for U.S. Structured Finance Transactions (June 10, 2021),
https://www.dbrsmorningstar.com/research/379958

-- Legal Criteria for U.S. Structured Finance (December 15, 2021), https://www.dbrsmorningstar.com/research/389789

-- Rating CLOs and CDOs of Large Corporate Credit and CLO Asset Model Version 2.2.3 (January 26, 2022), https://www.dbrsmorningstar.com/research/391226

-- Cash Flow Assumptions for Corporate Credit Securitizations (January 26, 2022), https://www.dbrsmorningstar.com/research/391225

-- Mapping Financial Institution Internal Ratings to DBRS Morningstar Ratings for Global Structured Credit Transactions (March 1, 2021), https://www.dbrsmorningstar.com/research/374333