DBRS Upgrades Accès Recherche Montréal L.P.’s Senior Secured Debt to “A,” Stable Trend

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

The upgrade mainly stems from the implementation of DBRS’s updated PPP methodology, which was published on October 17, 2018. In addition, the Project’s strong operating and financial performance since the start of operations in 2013 is commensurate with the “A” rating. The rating on the project is currently one notch below the A (high) rating of the Province of Québec.

The Project has been in operations for more than five years and has performed well with limited incurrence of failures points or deductions, and with both factors remaining well below contractual thresholds. Furthermore, any deductions incurred have been fully passed down to Honeywell Limited (a subsidiary of Honeywell International Inc., rated “A” with a Stable trend by DBRS) with no financial impact on ProjectCo.

ProjectCo indicated that the premature corrosion of the hot water tanks have been addressed through warranty claims without financial impact on ProjectCo.

ProjectCo achieved annual debt-service coverage ratios (DSCRs) of 1.41 times (x) and 1.39x in June 2018 and December 31, 2017, respectively. Furthermore, the Project’s debt-to-cash flow available for debt servicing in 2017 was about 8.5x. 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 operating phase and strong projected operating and maintenance and lifecycle resiliencies of 127% and 115%, respectively.

DBRS expects the project to continue to perform in line with expectations with minimal incurrence of failure points or deductions. DBRS could take a negative rating action if the project experiences significant operational challenges that results in a material accumulation of failure points or deductions. An upgrade to the rating is unlikely in the near term as the project’s operating and financial metrics commensurate with the rating category and the rating is one notch below that of the Province of Québec.

Notes:
All figures are in Canadian dollars unless otherwise noted.

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

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 under Related Documents or by contacting us at info@dbrs.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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