DBRS Changes Trend on New Brunswick (F-M) Project Company Inc. to Stable from Negative, Confirms Ratings at A (high)

DBRS Limited (DBRS) confirmed its ratings on the Highway Bonds and the Tranche A and Tranche B Senior Toll-Based Debt (collectively, the Senior Debt) of New Brunswick (F-M) Project Company Inc. (NBFM or the Company) at A (high). DBRS also changed the trends on all ratings to Stable from Negative following the confirmation and trend change of the ratings of the Province of New Brunswick (the Province) at A (high), Stable on April 18, 2019. The ratings on the Senior Debt are a flow-through of the long-term rating of the Province, as the principal and interest payments on the Senior Debt are funded directly by the New Brunswick Highway Corporation (NBHC), a provincial Crown agent. Although the transaction is structured as a public-private partnership (PPP), revenue available to service the Senior Debt is not subject to traffic volumes or abatement for the Company’s performance and continues in the event the route is unavailable. Debt servicing also survives termination of the Company under the Project Agreement.

In its press release “DBRS Changes Trend on New Brunswick to Stable from Negative, Confirms Ratings at A (high) and R-1 (middle)” dated April 18, 2019, DBRS notes the meaningful improvement in the Province’s fiscal and debt outlook. While the economic outlook remains challenging, DBRS has greater confidence that the Province will deliver on its fiscal policy commitments and that operating results will evolve as forecast. The press release states that a positive rating action is highly unlikely in the near term for the Province but that a rating downgrade is possible if any or a combination of the following occur: (1) a material underperformance of the current budgetary and debt outlook; (2) a material deterioration in economic conditions or (3) New Brunswick Power Corporation (NB Power) fails to demonstrate a continued reduction in leverage, causing DBRS to no longer treat NB Power as self-supported.

The Company is a not-for-profit corporation charged with the operation of a four-lane highway (the Highway) between Fredericton and Moncton under a PPP structure. NBFM has entered into a 30-year concession ending January 2028 from NBHC to design, build, finance, operate, rehabilitate and maintain the Highway.

RATING DRIVERS
Since the ratings on the Senior Debt are a flow-through of the long-term rating of the Province, a rating action by DBRS on the Province’s rating will affect the ratings on the Senior Debt.

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.

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

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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