Guaranteed Investment Certificates (GIC)

Diversify your investment portfolio with GICs

Guaranteed Investment Certificates (GICs) provide you with safe and flexible investment options.

With GICs, safety and security of your principal investment are guaranteed and the interest rate can be fixed or variable for the term of the investment. Choose from a large inventory of GIC products available from Scotia iTRADE and 3rd party providers.

To view the most current GIC rates, log on to your Scotia iTRADE account.

Ready to invest? Log on to your Scotia iTRADE account to get daily rates and purchase online from our extensive GIC inventory.

Also refer to our Fixed Income pricing and our entire Commission & Fee Schedule.

GICs are a safe and secure investment which offer a guaranteed rate of return over a fixed period of time. They are issued by chartered banks or specific financial institutions (mortgage, loan and trust companies) and range in maturities from one to five years. GICs enable you to match your investment needs while supplementing your income by offering the ability to receive interest payments either annually, semi-annually, monthly or in compound form.

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Accrued Interest

Interest due from issue date or from the last coupon date to the security settlement date. Interest that has accumulated on a bond since its most recent regular interest payment date. The buyer of the security pays the accrued interest to the seller and recoups a full payment on the next payment date.

Amortization

The process where, as time passes, your fixed income investment moves inexorably to its face value or maturing value.

Balloon

The maturing principal of a bond issue.

Bank rate

The Canadian equivalent of the discount rate. This is the minimum rate of interest that the Bank of Canada charges on one-day loans to financial institutions. In December 2000, the Bank began setting the level of the Bank Rate – and with it, the target for the overnight rate – on eight fixed dates per year.

Basis point

1/100 of a percentage point. It is often used to explain changes in bond yields. A 12 basis points increase in yield would mean a yield increase of 0.12 percentage points (e.g. 6.24 percent to 6.36 per cent is an increase of 12 basis points).

Benchmark

This refers to bonds by which others are valued. The Bank of Canada issues bonds at strategic maturity points (typically two, three, five, 10 and 30 years). When issuers bring new bonds to market, the presence of the Bank of Canada issues makes pricing easier since accurate market yields are readily available as references or benchmarks.

Bid price

The highest price a prospective buyer or dealer is willing to pay.

Bid size

The quantity (face value) of a security the highest bidding buyer wants to purchase.

Bid yield

The yield at which the highest bidding buyer is willing to purchase a security.

Bond

Evidence of a debt that is owed by a borrower who has agreed to pay a specific rate of interest, usually for a defined time period. At the end of that period the debt is repaid. Legally, a bond has assets pledged against the loan. In practice, the word is applied to any kind of term debt, collateralized or not.

Buy order

An order to purchase a security.

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Callable

A bond that can be redeemed by the issuer, prior to its maturity date. Certain conditions have to be met.

Call price

The price at which a callable bond can be bought back by the issuer.

Certificate of deposit

A fixed income security issued by a chartered bank. Minimum purchase amount is usually $1000 with terms of from one to seven years.

Commercial paper

Short-term debt instruments issued by non-financial corporations. They have maximum maturities of one year.

Convertible bond

A bond containing a provision that permits conversion to the issuer's common stock at some fixed exchange ratio.

Coupon
  • 1. The annual rate of interest on the bond's face value that a bond's issuer promises to pay the bondholder. That portion of a bond that provides the holder with an interest payment at a pre-specified rate. Quoted at an annual rate, but usually paid semi-annually.
  • 2. A certificate attached to a bond evidencing interest due on a payment date.
CUSIP number

The Committee on Uniform Security Identification Procedures, which was established under the auspices of the American Bankers Association to develop a uniform method of identifying municipal, government and corporate securities.

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Dealer

A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account.

Debenture

A debt that is secured solely by the general creditworthiness of the issuer and not by the collateralization or lien against specific assets.

Description

Short-form notation used to distinguish a particular issue. Typically follows the following protocol Issuer_Coupon_Maturity (i.e. CAN 8.75 12/05).

Detailed information

Information data set. Contains the CUSIP number, Description, Bid Price, Ask Price, Bid Yield, Ask Yield, Bid Size, Ask Size, Coupon, Maturity and Credit Ratings (CBRS, Moody's and S&P).

Discount

The amount by which a bond sells below its par (or maturity) value.

Discount securities

Non-interest bearing money market instruments that are issued at a discount and redeemed at maturity for full face value; e.g. Treasury bills.

Downward yield curve

This refers to an abnormal yield curve where the shorter the term to maturity, the higher the yield. It occurs typically when a central bank is determined to snuff out an inflationary cycle.

Duration

The average life of your fixed income investment. A ten-year bond is not exactly a ten-year bond. All the interest payments shorten the average term. The bigger the interest payments, the shorter the duration. For a zero coupon bond, maturity and duration are the same since there are no cash flows to worry about. This term is used in measuring risk.

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Extendible bond

An issue with a stated maturity date that under specific conditions gives the holder the right to extend the maturity for a further period.

Face value

Underlying principal amount of a security. The value of a bond that appears on the face of the certificate. It is almost always the maturity value of the bond. It is not an indication of current market value.

Flat yield curve

This refers to a yield curve where yields are the same at all maturities. 'Flat' can also mean that a bond is trading with no accrued interest, either because the settlement date coincides with the coupon payment date or else the issuer is not able to make interest payments.

Humped yield curve

This refers to a yield curve where some anomaly pushes yields at one or more maturity dates out of line with surrounding maturities.

Issuer

The entity (government or corporation) that borrowed the capital and is responsible for repaying the bondholder.

Income bond

A bond that pays interest only when earned by the issuer.

Inventory

To facilitate the retail and institutional clients, investment dealers maintain inventory of 'shelf products' financed with their own capital and which are offered at competitive prices.

Jobbers

Approved money market dealers who must bid for each week's treasury bill auction.

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Limit order

An order that is restricted in price.

Long term bond

One that matures in more than 10 years.

Make a market

A dealer is said to make a market when he quotes bid and offered prices at which he stands ready to buy and sell.

Market order

An order that is priced to move with the current market price. It must be executed as soon as possible at the best possible price.

Maturity date

The date on which the security matures is the day that the issuer must repay the amount borrowed plus interest to the holder of the note.

Medium term bond

One that matures in from 3 to 10 years.

Money market

A wholesale, financial market specializing in low risk, highly liquid debt instruments (bills, commercial paper, bankers' acceptances and corporate paper) with terms to maturity of less than 1 year.

Moody's rating

Method of credit analysis. A guide of relative bond value.

Municipals

Securities issued by local governments and their agencies.

Municipals (MUNI) notes

Short term notes issued by municipalities in anticipation of tax receipts, proceeds from a bond issue, or other revenues.

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Offer price

The price at which a dealer will sell the securities.

Offer size

The quantity (face value) of a security that is offered for sale.

Offer yield

The yield at which a security is offered for sale.

Off the run

This refers to a bond issue that is not a 'benchmark issue'. It may have a very high or low coupon, it may be a small illiquid issue, its ownership may be concentrated in few hands or it may have a feature, which makes it unattractive to trade. The bid-ask spread will be wider for such an issue, because dealers either do not wish to hold them in inventory or if they do, find it difficult to sell them quickly.

Order

An order is an expression of interest to either buy or sell an instrument.

Over the counter

This essentially means 'not centralized'. Unlike the equity market, which has a recognizable physical location to trade stocks, the bond market is decentralized, without one meeting place; transactions occur verbally or electronically between markets.

PAR
  • 1. Price of 100%.
  • 2. The principal amount at which the issuer of a debt security contracts to redeem that security at maturity, face value.
PAR value

The stated face value of a bond. It has no connection with the same expression that sometimes relates to common stocks. Also referred to as Face Value or Par.

Positive yield curve

This refers to a 'normal' yield curve, one in which the longer the term to maturity, the higher the yield.

Price

The dollar amount one or more parties are willing to pay/receive to purchase/sell a security. Price is typically expressed per $100 of Par Value.

Principal

What you lend. This value is expected to be returned to you at the bond's maturity date.

Provincials

Securities issued by provincial governments and their agencies.

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Quote

An indication of interest to either buy or sell.

Redeemable

This is similar to callable bonds but with one huge difference. Normally issued by corporations, a redeemable bond may be 'called' by the issuer but not for financial advantage; in other words, the issue may not be redone at a lower coupon rate. Rather, should a company have surplus cash or in the event of a corporate development the bond issue may be retired prematurely.

Reinvestment risk

There are two basic risks. The first is that the yield to maturity quoted on a bond may not be realized, since all interest payments never get reinvested at the same rate. Second, you will experience this risk if you have your entire portfolio maturing at the same time, and rates have fallen dramatically.

Residuals

The principal portion left over after all the interest payments have been stripped away.

Retractable

An issue that gives the holder the option, under certain circumstances, to redeem his holdings at their face value, prior to the final maturity date.

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Sell order

An order to sell a security.

Settlement date

The month, day, and year the transaction will settle. As per industry standards, settlement usually occurs 3 business days after trade date ("T+3") for Equities.

Fixed Income securities settle as follows:

  • Canadian, US T-Bills and Commercial Paper: T+1
  • GOC Bonds with an unexpired term of 3 years or less to maturity: T+2
  • All other Fixed Income instruments, including all Strip Bonds: T+3
Short sale

The sale of securities not owned by the seller in the expectation that the price of these securities will fall or as part of an arbitrage. A short sale must eventually be covered by a purchase of the securities sold.

Sinking fund

Indentures governing corporate issues often require that the issuer make annual payments to a sinking fund, the proceeds of which are used to retire randomly selected bonds in the issue.

Spread
  • 1. Difference between bid and offered prices on a security.
  • 2. Difference between yields on (or prices of) two securities of differing sorts or differing maturities.
  • 3. In underwriting, difference between price realized by the issuer and price paid by the investor.
  • 4. Difference between two prices or two rates. What a commodities trader would refer to as the basis.
Stripped bonds

A bond that has had all its coupons removed, thus creating a series of zero coupon issues, the maturity dates of which are the interest payment dates of the coupon, as well as the originally established maturity date. Generally sold at a discount.

Summary information

Information data set. Contains the CUSIP number, Description, Bid Price, Offer Price, Bid Yield, Offer Yield, Bid Size, Offer Size.

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Trade

A trade is a transaction. A trade has a buyer and a seller as well as a price and quantity.

Trade date

The date on which a transaction is initiated. The settlement day may be the trade date or a later date.

Treasury bill

Discount instruments issued by the federal government at a weekly auction. The T-bills generally have original maturities of 13 weeks (3 months), 26 weeks (6 months) and 52 weeks (1 year).

Two-sided market

Market in which both a bid and an offered price, good for the standard unit of trading, are quoted.

Two-way market

Market in which both a bid and an offered price are quoted.

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Volatility

How much the price of a bond changes for a given movement in yield.

Yield

The interest rate expressed as an annual percentage that the funds will earn or cost over the term of the security.

Yield curve

The relationship between the various maturities of same credit quality issues. The curve for Government of Canada bonds sets the base of relationships for the Canadian market. For a description of the various forms of yield curves, please see Downward yield curve, Flat yield curve, Humped yield curve and Positive yield curve.

Yield to maturity

The rate of return yielded by a debt security held to maturity when both interest payments and the investor's capital gain or loss on the security are taken into account. The return that an investor will receive if an issue is held to its maturity date and all coupons, as they are received, are re-invested at that yield level.

Zero coupon bond

A bond that pays no interest throughout its life. Zero Coupon Bonds (Zeros) sell at a discount to maturity value. The discount represents the return on the original investment, if the bond is held to its maturity date. The bonds are usually created using interest payment dates of a regular issue.

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1. What are GICs and why should I invest in them?
2. Which type of GIC is right for me?
3. Are there any penalties / costs for cashing in a cashable GIC before 30 days have elapsed, aside from not getting any interest?
4. What is the minimum purchase amount?
5. How will my GIC be protected?
6. Can GICs be purchased online?
7. What is the settlement date for GICs?
8. Can GICs be purchased within registered accounts?
9. Are there any fees when you buy GICs?
10. What are the risks associated with GICs?
11. What term length is best for me?
12. Where do I go for more help?

1. What are GICs and why should I invest in them?

Guaranteed Investment Certificate (GIC) is a Canadian investment that offers a guaranteed rate of return over a fixed period of time, most commonly issued by trust companies or banks. When you purchase a GIC, you are agreeing to lend your money for a set term of a few months to many years. Upon maturity of a GIC, you are guaranteed to get back 100% of the original amount you invested, plus the interest you earned. This is why GICs are one of the safest ways to invest your money.

Three common reasons for investing in GICs are:

  1. 1. Safe place to invest short-term savings
  2. 2. Safe place to put your money while you consider your long-term investment strategy
  3. 3. Diversify your investment portfolio

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2. Which type of GIC is right for me?

Chose a GIC that's right for you, with the flexible investment term (1 to 5 years) and a choice of interest payment frequency (e.g. monthly or annual):

Cashable GICs – Are one-year term investments that can be cashed any time after 30 days without penalty. They are perfect if you want a guaranteed interest rate without having to lock up your funds for long periods of time. Interest is not paid on a cashable GIC if redeemed within 30 days of the purchase date.

Non-Cashable GICs – Allow you to pick various term lengths to best fit your investment goals. If you are willing to lock in your funds, non-cashable GICs allow you to access very competitive rates and generally yield higher returns. Although they cannot be redeemed, non-cashable GIC's can be sold on the secondary market, though there is no guarantee that a secondary market exists for a particular non-cashable GIC. When you sell non-cashable GICs in the secondary market, you may not receive the full principal amount nor the original yield of the GIC.

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3. Are there any penalties / costs for cashing in a cashable GIC before 30 days have elapsed, aside from not getting any interest?

Cashable GICs may not be redeemed for 5 business days after purchase, and also have a further holding period during which if you redeem your cashable GIC you will receive no accrued interest and a fee may apply, depending on the GIC purchased. Please contact us for specific details regarding early redemption terms, interest penalties and applicable fees.

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4. What is the minimum purchase amount?

Minimum purchase amounts apply to each GIC, as specified by the issuer. Scotiabank GICs require a minimum investment of $1,000.

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5. How will my GIC be protected?

The principal amount is not at risk, unless the bank defaults. The guarantee for GICs is provided by the Canada Deposit Insurance Corporation (CDIC) up to a maximum of $100,000 (principal and interest combined), as long as the issuing financial institution is a CDIC member, and the original term to maturity is five years or less. All GICs offered by Scotia iTRADE are insured, except for US dollar GICs. Please refer to the CDIC website to find further information about the coverage.

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6. Can GICs be purchased online?

To purchase GICs online, log in to your account now. To sell or redeem GICs please call us at 1-888-872-3388.

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7. What is the settlement date for GICs?

All GIC purchases settle the next business day. The settlement date is also the issue date.

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8. Can GICs be purchased within registered accounts?

Yes, GICs can be purchased within both non-registered and registered accounts including RRSPs, RRIFs and TFSAs.

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9. Are there any fees when you buy GICs?

There are no fees or charges to buy or hold GICs.

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10. What are the risks associated with GICs?

  1. 1. Lagging behind inflation – Due to the relatively low return of regular GICs, they may not keep pace with inflation.
  2. 2. Unpredictable returns with index or market-linked GICs – Since the return of these GICs is based on the performance of a benchmark, like a stock market index, your return on these investments is dependent on the performance of the benchmark. This creates the potential for your GIC to outperform a fixed-rate GIC, but presents the equal risk of underperformance.

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11. What term length is best for me?

Generally, the longer the term, the higher the interest rate you will earn. Keep in mind, if you choose a term over 5 years, your GIC will not be CDIC insured. If you choose a term under 1 year, your interest rate may be lower than what you could get in a high interest savings account.

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12. Where do I go for more help?

For any other questions you may have, email us at service@scotiaitrade.com or call us at 1-888-872-3388.

DBRS Rating Scale: Long-Term Debt

The DBRS® long-term debt rating scale is meant to give an indication of the risk that a borrower will not fulfill its full obligations in a timely manner, with respect to both interest and principal commitments. Every DBRS rating is based on quantitative and qualitative considerations relevant to the borrowing entity. Each rating category is denoted by the subcategories "high" and "low". The absence of either a "high" or "low" designation indicates the rating is in the "middle" of the category. The AAA and D categories do not utilize "high", "middle", and "low" as differential grades.

AAA

Long-term debt rated AAA is of the highest credit quality, with exceptionally strong protection for the timely repayment of principal and interest. Earnings are considered stable, the structure of the industry in which the entity operates is strong, and the outlook for future profitability is favourable. There are few qualifying factors present that would detract from the performance of the entity. The strength of liquidity and coverage ratios is unquestioned and the entity has established a credible track record of superior performance. Given the extremely high standard that DBRS has set for this category, few entities are able to achieve a AAA rating.

AA

Long-term debt rated AA is of superior credit quality, and protection of interest and principal is considered high. In many cases they differ from long-term debt rated AAA only to a small degree. Given the extremely restrictive definition DBRS has for the AAA category, entities rated AA are also considered to be strong credits, typically exemplifying above-average strength in key areas of consideration and unlikely to be significantly affected by reasonably foreseeable events.

A

Long-term debt rated "A" is of satisfactory credit quality. Protection of interest and principal is still substantial, but the degree of strength is less than that of AA rated entities. While "A" is a respectable rating, entities in this category are considered to be more susceptible to adverse economic conditions and have greater cyclical tendencies than higher-rated securities.

BBB

Long-term debt rated BBB is of adequate credit quality. Protection of interest and principal is considered acceptable, but the entity is fairly susceptible to adverse changes in financial and economic conditions, or there may be other adverse conditions present which reduce the strength of the entity and its rated securities.

BB

Long-term debt rated BB is defined to be speculative and non-investment grade, where the degree of protection afforded interest and principal is uncertain, particularly during periods of economic recession. Entities in the BB range typically have limited access to capital markets and additional liquidity support. In many cases, deficiencies in critical mass, diversification, and competitive strength are additional negative considerations.

B

Long-term debt rated B is considered highly speculative and there is a reasonably high level of uncertainty as to the ability of the entity to pay interest and principal on a continuing basis in the future, especially in periods of economic recession or industry adversity.

CCC CC C

Long-term debt rated in any of these categories is very highly speculative and is in danger of default of interest and principal. The degree of adverse elements present is more severe than long-term debt rated B. Long-term debt rated below B often have features which, if not remedied, may lead to default. In practice, there is little difference between these three categories, with CC and C normally used for lower ranking debt of companies for which the senior debt is rated in the CCC to B range.

D

A security rated D implies the issuer has either not met a scheduled payment of interest or principal or that the issuer has made it clear that it will miss such a payment in the near future. In some cases, DBRS may not assign a D rating under a bankruptcy announcement scenario, as allowances for grace periods may exist in the underlying legal documentation. Once assigned, the D rating will continue as long as the missed payment continues to be in arrears, and until such time as the rating is suspended, discontinued, or reinstated by DBRS.

Rating Scale: Commercial Paper and Short-Term Debt

The DBRS® short-term debt rating scale is meant to give an indication of the risk that a borrower will not fulfill its near-term debt obligations in a timely manner. Every DBRS rating is based on quantitative and qualitative considerations relevant to the borrowing entity.

R-1 (high)†

Short-term debt rated R-1 (high) is of the highest credit quality, and indicates an entity possessing unquestioned ability to repay current liabilities as they fall due. Entities rated in this category normally maintain strong liquidity positions, conservative debt levels, and profitability that is both stable and above average. Companies achieving an R-1 (high) rating are normally leaders in structurally sound industry segments with proven track records, sustainable positive future results, and no substantial qualifying negative factors. Given the extremely tough definition DBRS has established for an R-1 (high), few entities are strong enough to achieve this rating.

R-1 (middle)†

Short-term debt rated R-1 (middle) is of superior credit quality and, in most cases, ratings in this category differ from R-1 (high) credits by only a small degree. Given the extremely tough definition DBRS has established for the R-1 (high) category, entities rated R-1 (middle) are also considered strong credits, and typically exemplify above average strength in key areas of consideration for the timely repayment of short-term liabilities.

R-1 (low)†

Short-term debt rated R-1 (low) is of satisfactory credit quality. The overall strength and outlook for key liquidity, debt, and profitability ratios is not normally as favourable as with higher rating categories, but these considerations are still respectable. Any qualifying negative factors that exist are considered manageable, and the entity is normally of sufficient size to have some influence in its industry.

R-2 (high)†

Short-term debt rated R-2 (high) is considered to be at the upper end of adequate credit quality. The ability to repay obligations as they mature remains acceptable, although the overall strength and outlook for key liquidity, debt and profitability ratios is not as strong as credits rated in the R-1 (low) category. Relative to the latter category, other shortcomings often include areas such as stability, financial flexibility, and the relative size and market position of the entity within its industry.

R-2 (middle)†

Short-term debt rated R-2 (middle) is considered to be of adequate credit quality. Relative to the R-2 (high) category, entities rated R-2 (middle) typically have some combination of higher volatility, weaker debt or liquidity positions, lower future cash flow capabilities, or are negatively impacted by a weaker industry. Ratings in this category would be more vulnerable to adverse changes in financial and economic conditions.

R-2 (low)†

Short-term debt rated R-2 (low) is considered to be at the lower end of adequate credit quality, typically having some combination of challenges that are not acceptable for an R-2 (middle) credit. However, R-2 (low) ratings still display a level of credit strength that allows for a higher rating than the R-3 category, with this distinction often reflecting the issuer's liquidity profile.

R-3†

Short-term debt rated R-3 is considered to be at the lowest end of adequate credit quality, one step up from being speculative. While not yet defined as speculative, the R-3 category signifies that although repayment is still expected, the certainty of repayment could be impacted by a variety of possible adverse developments, many of which would be outside of the issuer's control. Entities in this area often have limited access to capital markets and may also have limitations in securing alternative sources of liquidity, particularly during periods of weak economic conditions.

R-4†

Short-term debt rated R-4 is speculative. R-4 credits tend to have weak liquidity and debt ratios, and the future trend of these ratios is also unclear. Due to its speculative nature, companies with R-4 ratings would normally have very limited access to alternative sources of liquidity. Earnings and cash flow would typically be very unstable, and the level of overall profitability of the entity is also likely to be low. The industry environment may be weak, and strong negative qualifying factors are also likely to be present.

R-5†

Short-term debt rated R-5 is highly speculative. There is a reasonably high level of uncertainty as to the ability of the entity to repay the obligations on a continuing basis in the future, especially in periods of economic recession or industry adversity. In some cases, short-term debt rated R-5 may have challenges that if not corrected, could lead to default.

D†

A security rated D implies the issuer has either not met a scheduled payment or the issuer has made it clear that it will be missing such a payment in the near future. In some cases, DBRS may not assign a D rating under a bankruptcy announcement scenario, as allowances for grace periods may exist in the underlying legal documentation. Once assigned, the D rating will continue as long as the missed payment continues to be in arrears, and until such time as the rating is suspended, discontinued, or reinstated by DBRS.

† R-1, R-2, R-3, R-4, R-5 and D are certification marks of DBRS Limited.