DBRS Confirms Plenary Health Care Partnerships Humber LP’s Ratings at “A,” Stable Trends

DBRS Limited (DBRS) has today confirmed the ratings on the Series A Long-Term Senior Bonds and the Series B Long-Term Senior Bonds (collectively, the Bonds) of Plenary Health Care Partnerships Humber LP (ProjectCo) at “A” with Stable trends. ProjectCo is a special-purpose vehicle created to design, build, finance and maintain a new 1.7 million-square foot hospital facility (the Project) in northwestern Toronto, Ontario, under a 33.6-year project agreement (PA) with Humber River Regional Hospital (HRRH or the Hospital).

The Project achieved substantial completion on the target date of May 11, 2015, and the Hospital completed its transition into the facility on October 18, 2015. The $482 million of Short-Term Senior Bonds were fully repaid on May 14, 2015, from a portion of the proceeds of the substantial completion payment. ProjectCo has confirmed that the majority of works required for achieving final completion are complete and that they are currently addressing some outstanding items noted by the authority. The construction period budget remains essentially unchanged at $1,247 million, with minor variations to be separately funded by the Hospital.

The achievement of substantial completion on May 11, 2015, marked the beginning of the 30-year service phase during which Johnson Controls LP (JCLP or the Service Provider) performs all facilities management (FM) services on behalf of ProjectCo, including lifecycle obligations in order to return the facility in a state of good repair upon expiry of the PA. DBRS notes that the deductions for the first year of operations are expected to be nominal and that they have been passed down to the Service Provider. ProjectCo indicated that the facility is fully occupied by the Hospital and is in full operation.

Financial projections for the service phase remain consistent with the financial model and are adequate for the rating. The minimum debt service coverage ratio (DSCR) of 1.25 times (x) and equity lock-up DSCR of 1.15x is typically seen for availability-based public-private partnership projects in the “A” range. Further, the FM resiliency of 49% and lifecycle resiliency of 59% are supportive of the rating. A six-month debt service reserve and a relatively strong security package provided by the Service Provider will afford a modest cushion against unforeseen events during the service phase.

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.

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

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