DBRS Confirms New Brunswick (F-M) Project Company Inc. at A (high), Stable Trend

DBRS Limited (DBRS) has today confirmed its ratings on the Highway Bonds and the Tranche A and Tranche B Senior Toll-Based Debt (collectively, the Senior Debt) of New Brunswick (F-M) Project Company Inc. (NBFM or the Company) at A (high) with a Stable trend, following the confirmation of the ratings of the Province of New Brunswick (the Province) with a Stable trend on April 11, 2017. The ratings on the Senior Debt are a flow-through of the long-term rating of the Province, as the principal and interest payments on the Senior Debt are funded directly by the New Brunswick Highway Corporation (NBHC), a provincial Crown agent. Although the transaction is structured as a public-private partnership (PPP), revenue available to service the Senior Debt is not subject to traffic volumes or abatement for the Company’s performance and continues in the event that the route is unavailable. Debt servicing also survives termination of NBFM under the Project Agreement.

As noted in its press release “DBRS Confirms New Brunswick at A (high) and R-1 (middle)” dated April 11, 2017, DBRS notes that the Province’s fiscal recovery plan that was introduced last year to gradually restore balance by 2020–2021 remains on track and is expected to stabilize the debt burden. Given that New Brunswick’s fiscal performance remains aligned with DBRS’s expectations and that the debt burden is expected to stabilize, DBRS does not view the higher-than-expected debt burden (as a result of accounting changes related to last year’s public accounts) as cause for negative rating actions. However, DBRS reiterates that there is limited flexibility within the Province’s current ratings to withstand any deterioration in the fiscal and debt outlook without negatively affecting its ratings, which in turn would impact the ratings of NBFM.

NBFM is a not-for-profit corporation charged with the operation of a four-lane highway (the Highway) between Fredericton and Moncton under a PPP structure. NBFM has entered into a 30-year concession from NBHC to design, build, finance, operate, rehabilitate and maintain the Highway.

RATING DRIVERS:
-- Since the ratings on the Senior Debt are a flow-through of the long-term rating of the Province, a rating action by DBRS on the Province’s rating will impact the ratings on the Senior Debt.

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.

The principal methodology is Rating Public-Private Partnerships, which can be found on dbrs.com 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.