DBRS Confirms Hospital Infrastructure Partners (NOH) Partnership at A (low)

DBRS has today confirmed the rating on the Series A Senior Secured Bonds (the Bonds) of Hospital Infrastructure Partners (NOH) Partnership (ProjectCo) at A (low) with a Stable trend. ProjectCo is the special-purpose entity created to design, build, finance and maintain a new 1.8 million square foot hospital facility in Oakville, Ontario, under the 34-year project agreement (PA) with Halton Healthcare Services Corporation (the Hospital).

To date, construction has generally progressed on track to meet the Scheduled Substantial Completion Date of July 31, 2015. A July 16, 2012 schedule update reflects construction activity milestones that have been advanced to earlier dates, while permit and approval milestone dates have been postponed due to a slow design development process with the Hospital. Site plan approval, for example, is now anticipated for August 2012 rather than the originally planned date of November 2011; however, construction work is nonetheless permitted to advance. Approximately 80% of the work to be subcontracted by the design-build joint venture, consisting of EllisDon Corporation and Carillion Construction Inc (the Construction Contractor), has been procured. Site servicing, bulk excavation and general grading activities were nearly complete as of a July 6, 2012 site visit by the technical advisor (TA). Work on both the substructure and superstructure is progressing well. Activities mainly involve substructure concrete works, as well as superstructure lower level works comprising of columns, walls, stairwells and elevator shafts, and mechanical and electrical rough-in throughout the existing structure. The superstructure is scheduled for completion by May 2013, and building enclosure is expected by September 2013. Seven variation directives are outstanding with confirmations pending, but ProjectCo does not consider them to be of a nature that would impose significant risk to the schedule. ProjectCo’s relationship with the Hospital remains good, although the management of a large number of user groups, typical for a project of this size, is proving to be challenging.

The completion of the six-storey 457-bed facility in 2015 will mark the beginning of the 30-year operating phase, during which an experienced service provider owned by Carillion Canada Inc. and EllisDon Corporation (the Service Provider) will perform all facilities management services, including lifecycle, on behalf of ProjectCo. Financial projections for the service phase remain unchanged, with the debt-to-cash flow available for debt servicing ratio of 11.3 times projected in the first year of operation and the debt service coverage ratio (DSCR) of 1.25 times foreseen over the project’s term, both in the standard range for an “A”-range bond-financed PPP in recent years.

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.