DBRS Confirms HDBC at AA (low) with a Stable Trend

DBRS has today confirmed the rating of Halifax-Dartmouth Bridge Commission (the Commission or HDBC) at AA (low), with a Stable trend. The HDBC continues to exhibit sound credit fundamentals after another year of strong financial results. Moreover, resilient traffic, low tolls and prudent management should support healthy results in the coming years while the Commission engages in heavier-than-normal capital spending.

Despite the weak economy in the latter half of 2008, traffic flow on the bridges remained steady and HDBC continued to record sound results, with net income (excluding non-recurring items) of $6.8 million for the year ended December 31, 2008, up 3.9% over the prior year. Toll rates remained unchanged, yet revenue still saw a significant increase during the year, mainly due to $2.5 million in provincial funding for the maintenance on the Victoria Road Interchange (VRI), which also helped fuel spending. This year the HDBC transitioned to a March 31 year-end to be better aligned with the provincial fiscal year. For the three months ended March 31, 2009, the HDBC has continued to perform in line with expectations and at levels similar to previous years. Also in 2009, the Commission re-branded itself as Halifax Harbour Bridges, although its legal name remains Halifax-Dartmouth Bridge Commission.

The year 2008 was the first full year since the Commission refinanced its debt through the Province of Nova Scotia (the Province). This resulted in notably higher net interest coverage and gross interest coverage ratios of 5.4 times and 4.7 times, respectively. While the HDBC is going through a period of heavy capital expenditure, estimated at an average of $10 million per annum over the next five years, debt is expected to continue on a slow downward trend until the next major capital project, which will likely be the refurbishment of the Angus L. Macdonald Bridge, anticipated in six or seven years at a cost of roughly $140 million. While the project would entail a markedly higher debt level, it is expected to be manageable within HDBC’s current rating. Over the longer term, the possibility of a third harbour crossing maintains an element of uncertainty in the outlook and has the potential to lead to substantial debt-financing needs for the Commission if public authorities support the project. Nevertheless, the process is still at a very early stage and the project may never fully materialize.

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

The applicable methodology is Rating Canadian Public-Private Partnerships, which can be found on our website under Methodologies.

This is a Corporate (Public Finance) rating.