Press Release

DBRS Rates Integrated Team Solutions SCOC Partnership Senior Short Term Bonds and Senior Long Term Bonds at A (low), Stable Trend

Infrastructure
December 05, 2014

DBRS Limited (DBRS) has today assigned a provisional rating of A (low) with a Stable trend to the proposed $29.4 million Senior Short Term Bonds and $105.1 million Senior Long Term Bonds of Integrated Team Solutions SCOC Partnership (ProjectCo), the special-purpose entity created to design, build, finance and maintain the Phase One Civic Operations Centre (the Project) under a 27-year project agreement (PA) with the City of Saskatoon (the City).

The Project involves the design, construction, financing, maintenance and rehabilitation of a new a Bus Transit Operations Facility and a new Snow Management Facility. The Project also includes procurement and installation of selected equipment and materials, construction of a railway berm and all common utility infrastructure for the Project site. The construction phase is scheduled to commence on December 18, 2014, and will span 24 months to the Scheduled Substantial Completion Date of December 31, 2016. After substantial completion, the City shall make performance-based availability payments to ProjectCo until the PA expiry date, December 31, 2041.

The rating is underpinned by the low-to-moderate complexity of the project, the creditworthiness of the construction contractor and a suitable construction security package. ProjectCo will drop down on a back-to-back basis all the design, construction, and commissioning obligations under the PA to EllisDon Design Build Inc. (the Construction Contractor) through a fixed-price date-certain Construction Contract. The Construction Contractor’s obligations are fully backed by a joint and several parent company guarantees from EllisDon Inc. (EllisDon) and EllisDon Corporation, subject to a 50% liability cap. The construction security package also features a 6.5% non-recourse letter of credit (LC) and a corporate policy of subcontractor default insurance with a project-specific policy endorsement up to a per occurrence limit of $15 million and an aggregate limit of $45 million for all major subcontractors (with contract values exceeding $250,000). Similarly, the service risks and responsibilities are passed down on a back-to-back basis to Cofely Services Inc., (Cofely or the Service Provider) over the entire service phase through a fixed-price Service Contract. The service security package features a parent company guarantee from GDF Suez Energie Services S.A. up to a liability cap of 200% of average annual operations, maintenance and rehabilitation (OMR) costs (indexed), and an LC in the amount of 50% of annual average OMR costs (indexed). The Service Contract also features a dynamic lifecycle inspection and reserving mechanism for any deficiencies identified by the Technical Advisor (TA) during the service phase in excess of 7.5% of the remaining budget.

The City shall make a lump sum payment of $38.6 million at substantial completion, part of which will be used to fully redeem the Senior Short Term Bonds. The balance of funding for the Project will come from the Senior Long Term Bonds and an equity contribution of $10.2 million, representing 7.1% of the total capital at financial close, secured by a non-recourse LC provided at financial close. The Senior Long Term Bonds will be repaid quarterly during the service phase. The minimum debt service coverage ratio (DSCR) of 1.15 times and equity lock-up DSCR of 1.12 times are lower than typically seen for availability-based PPP projects in the “A” range. However, the operating and maintenance (O&M) resilience of 54.4% and Lifecycle resilience of 47.9% are supportive of 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.

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

Ratings

Integrated Team Solutions SCOC Partnership
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

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