DBRS Confirms Plenary Properties LTAP LP at “A” with Stable Trends

DBRS Limited (DBRS) confirmed Plenary Properties LTAP LP’s (ProjectCo) Issuer Rating (which was initially assigned on November 15, 2018) and the rating on ProjectCo’s Long-Term Senior Bonds (the Bonds) at “A” with Stable trends. ProjectCo is the special-purpose entity (SPE) created to design, build, finance, maintain and provide information technology (IT) and lifecycle services to the Communications Security Establishment Canada (CSEC) Long-Term Accommodation Project (LTAP). The project is governed by a 33.5-year Project Agreement (PA) signed between ProjectCo and the Government of Canada (the Crown; rated AAA with a Stable trend by DBRS) as represented by Defence Construction Canada (1951) Ltd. The LTAP facility substantially consolidated services previously furnished at several separate locations by CSEC, Canada’s foreign intelligence and national cryptologic agency. The project reached substantial completion on July 31, 2014, and final completion on April 25, 2016. Following the service commencement on August 1, 2014, the outstanding $167.5 million Short-Term Senior Bonds were repaid in full on the expected redemption date of August 18, 2014, by a portion of the service commencement payment.

The project is in the 57th month of its 30-year service phase. Honeywell Limited (the Facilities Management (FM) Service Provider), with a parent guarantee from Honeywell International Inc. (rated “A” with a Stable trend by DBRS), performs all FM services and lifecycle services on behalf of ProjectCo to return the facility to a state of good repair upon expiry of the PA. ProjectCo’s obligations related to IT support, including associated maintenance and lifecycle services, are passed down on a back-to-back basis to ESIT Canada Enterprise Services Co. (previously Hewlett Packard (Canada) Co.), with a parent guarantee from DXC Technology Company (considered investment grade by DBRS).

The project has maintained its sound operating performance record. Deductions have been low, amounting to less than $20,000 in 2018. ProjectCo indicates that its relationship with the Crown is collaborative, with no material issues. The projected financial metrics for the service phase remain adequate for the rating, with resiliencies of over 60% and a minimum debt service coverage ratio (DSCR) of 1.23 times (x). ProjectCo reported a DSCR of 1.34x in 2018, slightly higher than the ratio projected at financial close, mainly due to savings in SPE costs. A positive rating action on the Bonds by DBRS is unlikely. Prolonged weak service performance, giving rise to the requirement for contractor replacement, could lead to a negative rating action.

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 & Criteria.

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.

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.

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