DBRS Confirms TransLink at AA, Stable Trend

DBRS Limited (DBRS) confirmed the Issuer Rating and Senior Unsecured Debt rating of South Coast British Columbia Transportation Authority (TransLink) at AA and its Commercial Paper rating at R-1 (middle), all with Stable trends. The ratings are supported by TransLink’s diverse revenue streams, including its status as a taxing authority in the Metro Vancouver Regional District, robust ridership growth and strong regional economic growth dynamics. TransLink’s solid operating performance and robust long-term financial planning framework are also supportive of the ratings and Stable trends.

TransLink reported a surplus of $668 million in 2016 and a DBRS-adjusted surplus of $246 million after excluding one-time gains associated with a major real estate transaction. Passenger boardings rose by 4.5% year over year in 2016, an encouraging development bolstered by strong regional economic growth, the integration of the new SkyTrain Evergreen Extension and the roll-out of the Compass automated fare card system. Ridership through the first half of 2017 is tracking 2.9% ahead of budget expectations and is up by 5.7% compared with the same period in 2016. DBRS expects that TransLink will meet or exceed the Q2 2017 surplus projection of $112 million.

The Province of British Columbia (the Province; rated AA (high) with a Stable trend by DBRS) eliminated all bridge tolls in the Province effective September 1, 2017. DBRS previously consider the debt associated with the Golden Ears Bridge as self-supporting because of the dedicated toll mechanism. As a result, DBRS now includes the $1.0 billion contractor liability in its calculation of TransLink’s DBRS-adjusted net debt burden, which will increase to $3.9 billion, or $1,504 per capita (from $1,055), in 2017. Based on the current investment plan, projections indicate that DBRS-adjusted net debt will reach $4.1 billion in 2019, or $1,557 per capita, a level that is still considered manageable for the ratings. However, over the medium term, investment plans for Phases Two and Three of the Mayors’ Council’s 10-Year Vision for Metro Vancouver Transportation may result in a higher debt outlook, as major projects such as the Pattullo Bridge replacement, Millennium Line Broadway Extension and South of Fraser Rapid Transit Network are undertaken.

RATING DRIVERS
The outlook for the ratings is stable. Ratings improvement is constrained by a rising debt burden and the provincial decision to remove own-source revenue available for debt repayment from bridge tolls. Upward pressure on the ratings is not foreseen but could materialize if the debt burden were to be reduced significantly. While not anticipated, the ratings could experience downward pressure should operating performance deteriorate significantly on a sustained basis or if debt evolves materially above current projections.

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 methodologies are Rating Canadian Municipal Governments and DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers, 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.

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.