DBRS Confirms Accès Recherche Montréal L.P. at A (low) with a Stable Trend

DBRS Limited (DBRS) confirmed the rating on the Senior Secured Debt of Accès Recherche Montréal L.P. (ProjectCo) at A (low) with a Stable trend. ProjectCo is the special-purpose vehicle created by Axium Recherche L.P. and Meridiam Infrastructure (SCA) SICAR (Meridiam) to design, build, finance and maintain a new 68,431-square-metre research centre (the Project) under a 33.3-year public-private partnership with the Centre Hospitalier de l’Université de Montréal (CHUM or the Hospital), one of Québec’s largest health-care institutions.

The Project has been in operations for more than four years and has performed in line with expectations, incurring minimal failure points or deductions and with both factors remaining well below contractual thresholds. Furthermore, deductions incurred in 2016 and the first three quarters of 2017 were fully passed down to Honeywell with no financial impact on ProjectCo.

In its bi-annual operational report dated July 2017, the Lenders’ Technical Advisor (LTA) noted some defects associated with the exhaust fans on the facility’s roof and premature corrosion with the hot water tanks. However, ProjectCo has indicated that the defects had been remediated with no financial impact on ProjectCo. In addition, the minor defects did not give rise to any failure points as there are redundancies in the hot water tanks and the vibration noise caused by the exhaust fans did not impact their functionality.

ProjectCo achieved annual debt service coverage ratios (DSCR) of 1.40 times (x) in June 2017 and December 31, 2016, respectively. Furthermore, the Project’s debt-to-cash flow available for debt servicing in 2016 was about 8.5x, which was in line with DBRS’s expectations. In accordance with the financial model at financial close, DBRS expects the Project to continue to generate a minimum DSCR of 1.37x in the service phase and strong projected operating and maintenance and lifecycle resiliencies of 127% and 115%, respectively.

DBRS expects the project’s operating and financial performance to remain relatively stable with minimal incurrence of failure points or deductions. However, DBRS could take a negative rating action if the project incurs significant deductions that lead to a material reduction in the liability cap of Honeywell or the deterioration of the operating performance of the project no longer commensurate with the rating category.

Although the Project’s projected minimum DSCR and its operating and maintenance and lifecycle resiliencies are relatively higher than most of its peers and high for the rating category, the rating remains constrained by the rating of Province of Québec of A (high).

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

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