DBRS Confirms Plenary Health Peel LP Series A Senior Bonds at A (low), Stable

DBRS Limited (DBRS) has today confirmed the rating of A (low) on the Series A Senior Bonds (the Bonds) issued by Plenary Health Peel LP (ProjectCo), the special-purpose entity created to design, build, finance and maintain a new 350,000 square foot hospital facility in Brampton, Ontario (the Project), under a 32.3-year project agreement (PA) with William Osler Health System (the Hospital) and the Province of Ontario (rated AA (low) with a Stable trend by DBRS). The trend is Stable, supported by the pace of construction activities exceeding the revised schedule by approximately eight weeks.

On March 16, 2015, there was a large fire on the site that caused substantial damage to the formwork system, the structure, mechanical and electrical rough-ins, cranes as well as miscellaneous equipment and small tools. DBRS previously noted that, as of June 30, 2015, the damaged caused as a result of the fire was substantially rectified with little remaining evidence of heat and fire damage. To date, ProjectCo received proceeds amounting to $12 million related to the claim. Additional claims have been made to reimburse the Design-Builder and ProjectCo and are still pending final approval and review by the insurance company. ProjectCo should fully recover all additional financing costs related to the delay to the Substantial Completion Date from the Design-Builder’s claim. While the Target Substantial Completion Date was revised to October 24, 2016, from August 31, 2016, construction progressed ahead of expectations and the Hospital was certified for occupancy transition activities on August 24, 2016.

The exterior and interior building construction has advanced to completion with remaining work relating to the fitting of exterior steel building canopy. Interior finishes are nearing completion with minor work remaining to be done on the east side of the third floor. Delivery and installation of equipment has progressed and diagnostic imaging equipment has been installed. Roadways and landscaping are also nearing the final stages of completion with few activities left to be completed. To date, 26 Variations have been issued. DBRS notes that six variations remain to be completed, but ProjectCo does not expect their completion to be overly complicated as some variations primarily relate to process changes.

The 30-year service phase will commence upon Substantial Completion and entails routine maintenance of the facility including plant services, help-desk services, grounds maintenance and security of systems infrastructure as well as lifecycle maintenance to return the facility to the Hospital in a state of good repair upon the expiry of the PA. Except for general management and insurance responsibilities, all of ProjectCo‘s obligations related to the services phase have been subcontracted to Honeywell Limited, which has considerable experience with clinical public-private partnerships and lifecycle maintenance, for the term of the Project on a back-to-back basis.

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 (March 2016), which can be found on our website under Methodologies.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

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.

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