DBRS Confirms and Discontinues Strait Crossing Development Inc.

DBRS has today confirmed and discontinued the BBB rating with Negative trend on the Revenue Bonds of Strait Crossing Development Inc. (the Company). The discontinuation was requested by the Company and is unrelated to its credit profile.

Traffic on the Confederation Bridge (the Bridge) has recovered notably since the sharp decline experienced in 2008, including an increase of 3.8% in 2009 and further gains of 2.9% recorded during the first half of 2010 relative to the same period a year ago. This, along with annual toll increases of 75% of CPI, has helped stabilize financial metrics. At 1.1 times, however, the debt service coverage ratio remains low for a BBB rating, especially for a volume-based credit with little fee-setting autonomy and accretive debt servicing requirements. As a result, despite the essential nature of the Bridge to Prince Edward Island residents and the sizeable reserves maintained by the Company, limited operating flexibility is left to weather potential future shocks or a protracted period of soft economic conditions, which prevents DBRS from restoring the Stable trend on the rating prior to its discontinuation.

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