DBRS Confirms EllisDon Infrastructure JBH Inc. at A (low)

DBRS Limited (DBRS) has today confirmed the ratings of A (low) with Stable trends on the $137.7 million Series A Short Term Senior Bonds (Series A Bonds) and the $185.8 million Series B Short Term Senior Bonds (Series B Bonds) issued by EllisDon Infrastructure JBH Inc. (ProjectCo), the special-purpose entity created to design, build and finance the construction of a new tower (the Tower) and refurbishment of portions of the existing hospital in Burlington, Ontario (the Project), under a 45-month Project Agreement (PA) with the Joseph Brant Hospital (JBH or the Hospital).

Construction is generally progressing as originally scheduled, although the cumulative value of work is approximately 9% behind the maximum drawdown schedule. However DBRS notes that these works are not along the construction schedule’s critical path and at this time the Scheduled Substantial Completion Date is believed to be achievable given the advancement thus far and construction activities planned for the upcoming years. As of the end of October 2015, the Project was in its tenth month of a 43-month schedule and nearly 20% complete, as measured by the gross work completed to the contract price. DBRS intends to closely monitor the progress of the work in the coming months.

Current construction activities predominantly involve the seven-storey tower’s superstructure as excavation and substructure activities were completed in September 2015. The tower’s structural components from the ground floor to the fourth floor are complete, while the fifth floor is currently underway. Progress of the tower is proceeding as planned and the Design-Build Contractor indicated the possibility that the superstructure work could be ahead of schedule if weather conditions during the winter months are favourable. Other ongoing activities include plumbing, the elevator shaft, precast concrete stairs and curtain walls.

In the coming year, construction of the tower is expected to continue smoothly as DBRS is not aware of any major construction issues at this time. During this period, construction activities will mainly involve the tower, which includes installation of mechanical and electrical, finishings and elevators. Commissioning work for the tower will begin towards the end of 2016 and tower occupancy is aimed for the summer of 2017. Refurbishment works are expected to be commenced in 2017.

The ratings continues to be underpinned by the sound credit quality of the construction contractor and its parent company, a comprehensive security package and the relatively straightforward nature of the construction task. DBRS also views the stream of completion payments be received from the Hospital to be low risk in nature. However, the ratings are constrained by the typical uncertainties regarding construction adjacent to an existing operating hospital and the limited resources of ProjectCo to weather unexpected shocks. As there is no service phase, the A (low) ratings have been assigned solely on the basis of the construction phase rating.

Notes:
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, which can be found on our website under Methodologies.