S&P: Ontrea Inc. C$600M Debenture Issue Rated 'AAA'.Business Editors TORONTO--(BUSINESS WIRE)--March 31, 2003 Standard & Poor's Ratings Services today said it assigned its 'AAA' local currency senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. rating to the forthcoming C$600 million series B debenture issue (due 2013) by Ontario Teachers' Pension Plan The Ontario Teachers' Pension Plan (OTPP), commonly referred to as Teachers', is the organization responsible for administering pensions for public school teachers of Ontario. The OTPP also invests the plan's pension fund. Board's (OTPPB's) wholly owned real estate subsidiary, Ontrea Inc. At the same time, Standard & Poor's affirmed the 'AAA' rating on Ontrea Inc.'s series A debenture issue. Both series will rank pari passu [Latin, By an equal progress; equably; ratably; without preference.] Used especially to describe creditors who, in marshalling assets, are entitled to receive out of the same fund without any precedence over each other. PARI PASSU. By the same gradation. with each other as well as all other present and future unsecured and unsubordinated indebtedness of Ontrea. The issue rating reflects the unconditional and irrevocable guarantee provided by OTPPB OTPPB Ontario Teachers Pension Plan Board (Canada) . Formal finalization of this rating is subject to receipt and review of final issue documentation. The rating on the issue reflects the creditworthiness Creditworthiness The condition in which the risk of default on a debt obligation by that entity is deemed low. Creditworthiness Eligibility of an individual or firm to borrow money. of OTPPB and its strong financial position as one of the largest Canadian pension plans. The credit profile of OTPPB also reflects the independence from its sponsors; the solid track record in asset growth and above benchmark returns; surplus management and risk management; a highly effective governance structure; and the strong financial ratios of the fund, which compare favorably with 'AAA' rated pension funds. The credit profile of OTPPB also reflects the strong backstop funding and legislative support of the Province of Ontario (AA/Stable/A-1+) and the payment priority of obligations related to the guarantee. "The rating reflects the highly experienced and respected executive team, with a forward-looking plan and a cautious approach to the management of assets and liabilities, including independent actuarial valuation assumptions," said Standard & Poor's credit analyst Maria Rabiasz. OTPPB has provided a negative covenant A provision found in an employment agreement or a contract of sale of a business that prohibits an employee or seller from competing in the same area or market. A negative covenant is commonly used by businesses, particularly those that depend upon trade secrets for their against providing financial guarantees that in aggregate exceed 5% of OTPPB's net assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. . The rating also takes into account the challenge faced by OTPPB in fulfilling its long-term asset-liability objectives in a challenging investment environment. The prolonged volatility in the global equity markets has negatively affected all pension funds, including OTPPB. The actuarial value of net assets of OTPPB was 103% (down from 110.7% a year earlier) of pension liabilities Pension liabilities Future liabilities resulting from pension commitments made by a corporation. Accounting for pension liabilities varies widely by country. on a financial statement basis at Dec. 31, 2002. Nonetheless, Standard & Poor's believes that OTPPB will continue to manage its financial position to warrant high confidence in its ability to meet its obligations. For the year ended Dec. 31, 2002, OTPPB posted a return of negative 2.0%, compared with negative 2.3% in the previous year. Despite these negative returns, OTPPB has delivered an average annual compounded rate of return of 10.4% in a 10-year period and has consistently outperformed its benchmark returns on a risk-adjusted basis. A pension fund's acquired strength and resilience is a by-product by·prod·uct or by-prod·uct n. 1. Something produced in the making of something else. 2. A secondary result; a side effect. by-product Noun 1. of its very nature and serves the purpose of accumulating financial assets Financial assets Claims on real assets. well in advance of their anticipated need. OTPPB has demonstrated superior investment returns since gaining increased investment flexibility in 1990. In the past decade, net assets (at Dec. 31) have grown to C$66.2 billion in 2002 from C$33.7 billion in 1993. As of Dec. 31, 2002, OTPPB managed net assets of C$66.2 billion, had an annual benefit payout of C$3.1 billion, and received annual contributions of C$1.4 billion. It had 334,000 members, of which 154,000 were active contributors. Participation is mandatory for all certified school board teachers and those from other designated institutions in Ontario. Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar A set of buttons or graphic images typically in a row or column used as a central point that link you to major topic sections on a Web site. If the navigation bar is a single graphic image with multiple selections, it is known as an imagemap. See imagemap. , select Credit Ratings Actions. ANALYTICAL E-MAIL ADDRESSES: maria_rabiasz@standardandpoors.com donald_chu@standardandpoors.com canadian_ratings@standardandpoors.com Copyright 2003, Standard & Poor's Ratings Services |
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