...Rating Rationale: The `AAA' rating on National Bank of Canada (NBC) legislative mortgage covered bonds is based on NBC's long-term Issuer Default Rating (IDR) of `A+', an IDR uplift of 0, payment continuity uplift (PCU) of 6, rating uplift (RU) of 2 and the program's contractual asset percentage (AP) of 91.7%, which is more conservative than Fitch Ratings' `AAA' break-even AP of 93%. Payment Continuity Uplift: The PCU of six notches is an increase from the former D-Cap of three notches and reflects the liquidity gap protection in the form of a 12-month maturity extension for soft bullet bonds and protection for timely interest payments through a reserve fund, which will cover three-month interest payments and senior expenses if NBC is no longer rated at least `A' and `F1'. The demand loan can be paid in kind and does not compromise the PCU. Recovery Uplift: The program is eligible for a two-notch recovery uplift as the `AAA' break- even AP compensates for the `AAA' credit loss and the program...
