DBRS Publishes Updated Public Finance Methodology

DBRS has today published an updated public finance methodology entitled “Rating Public-Private Partnerships.” This supersedes the methodology of the same title dated March 2015.

The methodology dated March 2015 stated that the presence of two or more contractors in a design-build joint venture (DBJV) can, under certain conditions, permit one notch of ratings uplift where two of the contractors are assessed to be of the same creditworthiness, are both jointly and severally liable for the obligations of the DBJV and are both assessed as technically and financially capable of performing the construction task in the absence of the other DBJV member.

This methodology revision extends the number of circumstances under which such joint and several uplift could be applied, in particular to situations where there are three or more DBJV members that are jointly and severally liable. In these situations, up to two notches of ratings uplift may be permitted where the three most creditworthy members are assessed as having the technical and financial capacity to complete construction on their own and provided further that the three most creditworthy are rated or internally assessed to be within one notch of the most creditworthy contractor and the least creditworthy of these three contractors is rated or internally assessed to be at least BB. In situations where the difference between the three most creditworthy contractors is two notches, DBRS may apply one notch of uplift, provided that the other conditions as outlined above remain the same.

For further details, including the implications of a downgrade of any of the contractors, please refer to the newly published methodology.

Since this is an extension of a concept that already applies and it would only apply in those relatively rare public-private partnerships that have three or more JV partners, the three most creditworthy of which DBRS considers to have the technical capability and financial capacity to complete the project on their own, DBRS does not consider this change to the methodology to be material. Furthermore, DBRS has determined that no rating changes or rating actions were caused by the publication of this updated methodology.

Notes:
DBRS's rating definitions and the terms of use of such ratings are available at www.dbrs.com.

The methodology providing DBRS’s processes and criteria is available by contacting us at info@dbrs.com.