DBRS Confirms Plenary Health Hamilton LP Senior Bonds at “A,” Stable

DBRS Limited (DBRS) has today confirmed the rating of “A” with a Stable trend on the $255 million Long Term Senior Bonds (Long Term Bonds) of Plenary Health Hamilton LP (ProjectCo). ProjectCo is the special-purpose entity created to design, build, finance and maintain a new 305-bed mental health facility (the Project) under a 33-year public-private partnership with St. Joseph’s Healthcare Hamilton (the Hospital).

The Project successfully achieved substantial completion on the target date of December 6, 2013. Final completion has not yet been achieved, although the requirements are nearly met and are expected to be completed by September 2015. DBRS notes that a delay in achieving final completion does not affect the payment stream as 125% of the value of the outstanding work has been withheld by the Hospital and, in turn, is withheld from PCL Constructors Canada Inc. The remaining work is primarily related to the integrated security system and involves replacing certain security devices in the ceiling of some inpatient units. Presently, the last steps of modifications are expected to be completed by September 2015. Progress has been slower than anticipated since the units are occupied 24 hours a day, seven days a week, making coordination more challenging. ProjectCo anticipates that the final completion certificate will be granted once the security system work has been completed. All minor deficiencies inside the facility have been rectified and the Hospital began transitioning patients into the facility in 2014.

The achievement of substantial completion in 2013 marked the beginning of the 30-year service phase, during which Honeywell Limited (the Service Provider) performs all facilities management (FM) services as well as lifecycle services on behalf of ProjectCo in order to return the facility to a state of good repair upon expiry of the Project Agreement. The actual and projected financial metrics for the service phase remain consistent with the financial model and adequate for the rating. A six-month debt service reserve and the performance security provided by the Service Provider, which includes a letter of credit in an amount equal to one half of the annual FM plus average lifecycle (indexed), afford a modest cushion against unforeseen events during the service phase. A DSCR of 1.25 times (x) in the period is higher than the projected amount of 1.22x because of the timing of receipt of cash for variation work and related payment of expenses.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodology is Rating Public-Private Partnerships (March 2015), which can be found on our website under Methodologies.

The full report providing additional analytical detail is available by clicking on the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.