DBRS Confirms Plenary Health Bridgepoint LP at “A,” Stable Trend

DBRS Limited (DBRS) confirmed the Issuer Rating of Plenary Health Bridgepoint LP (ProjectCo) at “A,” which was assigned on November 15, 2018. DBRS also confirmed the rating of the Senior Amortizing Bonds (Series A) at “A.” All trends are Stable.

ProjectCo is the special-purpose vehicle to design, build, finance and maintain a new 472-bed hospital (the Project) and refurbish the adjacent historic Don Jail for administrative purposes under a 33.6-year Project Agreement with Bridgepoint Hospital (Hospital), one of Ontario’s largest complex-care institutions. ProjectCo’s responsibilities during the service phase have been largely passed down to Johnson Controls LP (JCLP) under an indexed fixed-price contract.

The Project continued to perform well, and ProjectCo’s operating performance improved modestly compared with last year, as indicated by the lower level of deductions incurred for the 12 months ended August 2018. Total deductions incurred were about 0.1% of the annual service payment. The largest deduction of about $20,400, which was incurred in November 2017, was related to an elevator failure in the administrative building that required a component to be replaced. In addition, failure points incurred to date remain well below contractual thresholds.

The Facilities Management Contract (the FM Contract) also contains an annual energy painshare/gainshare mechanism. ProjectCo expects the energy consumption for the year ended June 2018 to be below the annual target level, and any associated energy gainshare will be passed down to JCLP.

For the last 12 months ended August 2018, ProjectCo’s senior debt service coverage ratio (DSCR) was 1.21 times (x), which was in line with its projection. ProjectCo is projecting a senior DSCR of about 1.21x for the year ending August 2019. ProjectCo’s operating and maintenance (O&M) and lifecycle resiliencies of 78% and 87%, respectively, are considered strong for the ratings and provide it with more capacity to absorb any potential O&M and lifecycle cost increases.

Negative rating pressure could result if ProjectCo experiences significant operational challenges resulting in a material accumulation of failure points. DBRS believes a positive rating action is unlikely given the fixed revenue stream from the Hospital and the fixed-priced FM Contract with JCLP.

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.

DBRS will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at info@dbrs.com.