DBRS Confirms Plenary Health Peel LP’s Issuer Rating and Series A Senior Bonds Rating at A (low), Stable

DBRS Limited (DBRS) confirmed the Issuer Rating and the Series A Senior Bonds (the Bonds) rating issued by Plenary Health Peel LP (ProjectCo) at A (low). ProjectCo is the special-purpose entity created to design, build, finance and maintain a new 350,000-square-foot hospital facility in Brampton, Ontario (the Project), under a 32.3-year project agreement (PA) with William Osler Health System (the Hospital) and the Province of Ontario (rated AA (low) with a Stable trend by DBRS). The trends on the Issuer Rating and the Bonds are Stable, supported by the completion of construction activities, a smooth transition to the service phase and a stable level of performance to date.

The Project achieved Substantial Completion on the revised target date of October 24, 2016, which was delayed by eight weeks by the on-site fire that occurred on March 16, 2015. Construction work was completed by the design-build contractor, PCL, a subsidiary of PCL Construction Group Inc., and Final Completion was certified on June 6, 2017. Minor deficiencies have since been completed along with all variation works except for a recently issued and relatively minor change order that is expected to be completed within a reasonable time frame.

The Project is in the 25th month of the 30-year service phase. ProjectCo’s responsibilities include routine maintenance of the facility, including plant services, help-desk services, grounds maintenance and systems infrastructure security as well as lifecycle maintenance, to return the facility to the Hospital in a state of good repair upon the expiry of the PA. Except for general management and insurance responsibilities, all of ProjectCo’s obligations related to the service phase have been subcontracted to Honeywell Limited (Honeywell or the Service Provider), which has considerable experience with public-private partnerships, for the term of the Project on a back-to-back basis. Honeywell’s performance continues to be stable, with only minor deductions and failure points, having accumulated fewer than ten points in the year. The actual and projected financial metrics for the service phase remain consistent with the financial model and adequate for the ratings. The debt service coverage ratio per the Compliance Certificate as of September 30, 2018, has been reported at 1.18 times, in line with original forecast estimates. The relationship between ProjectCo, the Service Provider and the Hospital remains cooperative, with any issues encountered being resolved on a timely basis.

Service period performance-related issues leading to protracted material deductions could result in a negative rating action, whereas the Project has limited credit upside at the current ratings of A (low) with Stable trends.

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 under Related Documents 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 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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrs.com.