DBRS Confirms Plenary Health Bridgepoint LP at “A”, Stable

DBRS has today confirmed its rating of “A”, with a Stable trend, on the Senior Amortizing Bonds (Series A) of Plenary Health Bridgepoint LP (ProjectCo), the special-purpose entity created to design, build, finance and maintain a new 472-bed hospital and refurbish the adjacent old Don Jail for administrative purposes under a 33.6-year Project Agreement (PA) with the Bridgepoint Hospital (BH or the Hospital), one of Ontario’s largest complex care institutions.

Construction began in August 2009 and remained on schedule as of the end of August 2010, with approximately 18% of the project completed. Work has advanced smoothly with no material scope changes and no major concerns raised by BH or BTY Group (the TA). The ‘Early Works’ portion of the project and the bulk of excavation works and caisson installation have been completed. Three cranes have been erected and are operating, with foundation walls and column construction in progress, and storm and sewer lines are being installed. Demolition work and salvaging of existing heritage materials in the old Don Jail is progressing as planned. Mock-ups have been dismantled, with a summary of mock-up comments and/or changes issued to PCL Construction Group (PCL), which is in the process of responding.

The expected date for substantial completion of the project is unchanged, at March 3, 2013 – 12 months before the PA’s Longstop Date. The TA has certified that PCL has completed a total of $64 million of construction work for the period ending July 31, 2010. In terms of budget, the project is tracking closely to the original plan, with the total cost of the project still expected to be $379 million.

The completion of hospital construction in 2013 will mark the beginning of the 30-year operating phase, during which Johnson Controls LP will perform all facilities management (FM) services, including lifecycle, on behalf of ProjectCo. Financial projections for the service phase remain unchanged, with projected senior debt-to-EBITDA of nearly 10.0 times (x) and a debt service coverage ratio of 1.22x at the onset of the service phase. These financial metrics are acceptable for the rating, in part because of the expected stability of availability-based payments from BH through the term of the project; however, resilience to adverse shocks such as the replacement of the DB Contractor or the Service Provider at a significant premium is limited. A six-month debt service reserve and the performance security provided by the Service Provider will afford a modest cushion against unforeseen events during the service phase.

Note:
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.