DBRS Rates SLEECS Series 2009-1 at A (high), Stable Trend

DBRS has today rated the $500 million issue of the Sun Life ExchangEable Capital Securities – Series 2009-1 (SLEECS Series 2009-1) issued by Sun Life Capital Trust II (the Trust) at A (high) with a Stable trend, as indicated in the Short Form Prospectus dated November 17, 2009.

The A (high) rating is consistent with the existing rating assigned to the Sun Life ExchangEable Capital Securities - Series B (SLEECS Series B) issued by Sun Life Capital Trust in 2001. While the two issues are structured slightly differently, the result is effectively the same for both – the tax-efficient issue of Tier 1 capital by Sun Life Assurance Company of Canada (SLA). As with the earlier issue, SLEECS Series 2009-1 is expected to provide SLA with Tier 1 regulatory capital treatment by virtue of its convertibility into SLA preferred shares under certain stress events.

The respective Trusts use the proceeds to purchase a senior unsecured debenture from SLA, the income from which is used to meet the current debt service requirements of the respective SLEECS issues. Should SLA not make payment on its debenture, investors in the hybrid issues will see their investments converted into preferred shares of SLA. Correspondingly, under stress, the credit risk of the SLEECS would be consistent with that of SLA’s preferred shares.

On a pro forma basis, the consolidated total debt ratio of Sun Life Financial Inc. will increase from 25.9% at the end of Q3 2009 to 28.3%. At SLA, the impact on the Minimum Continuing Capital and Surplus Requirement is an increase of approximately 10 points to 229%. Both ratios are acceptable for the current ratings.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Canadian Life Insurance, which can be found on our website under Methodologies.

This is a Corporate (Financial Institutions) rating.