DBRS Confirms CSS (FSCC) Partnership at A (low), Stable

DBRS has today confirmed the rating of A (low) with a Stable trend on the $190 million Senior Secured Bonds of CSS (FSCC) Partnership (ProjectCo). ProjectCo is the special-purpose entity created to design, build, finance and maintain a new 665,000 (circa) square foot Forensics Services and Coroner’s Complex (the Project) under a 32.5-year public-private partnership with Ontario Infrastructure and Lands Corporation (OILC, formerly known as Infrastructure Ontario).

On January 30, 2013, ProjectCo and OILC reached a settlement whereby OILC agreed to provide compensation and schedule relief for the impact of undisclosed salt contamination found on-site during construction and the significant and lengthy equipment variation process which impeded the progress of design and development. As part of the settlement, a new milestone, Total Substantial Completion, was added and defined as meeting all of the requirements of the original definition of Substantial Completion, and was scheduled for April 15, 2013, representing a ten-week extension from the original target Substantial Completion date of January 31, 2013. Substantial Completion, redefined as the date by which the occupancy certificate was received from the City, was achieved on February 15, 2013, and triggered the Substantial Completion Payment of $150 million and the monthly service payments. The Construction Contractor, Carillion Construction Inc. (responsible for performing all of ProjectCo’s material construction obligations), paid liquidated damages for the additional financing costs incurred between the original target Substantial Completion date of January 31, 2013, and the actual Substantial Completion date of February 15, 2013, although the overall amount was relatively small. ProjectCo successfully achieved Total Substantial Completion on April 15, 2013, as per the revised schedule.

A variation directive was issued by OILC in March 2013 to postpone the transition of the Ministry of Community Safety and Correctional Services staff into the facility for early fall 2013. ProjectCo agreed to apply for the Final Completion Certificate after the transition had been completed. The transitioning process began in September 2013 and was complete by the end of October 2013. ProjectCo expects that it will be in a position to apply for the Final Completion Certificate by mid-November 2013.

The achievement of Substantial Completion marked the commencement of the 30-year service phase, entailing routine maintenance of the facility and its electromechanical equipment, as well as management of energy consumption and lifecycle maintenance in order to return the facility to OILC in a state of good repair upon expiry of the Project Agreement. The financial projections for the service phase remain consistent with the financial model, and adequate for the rating.

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.