DBRS Confirms TransLink at AA, R-1 (middle); Stable Trends

DBRS Limited (DBRS) confirmed the Issuer Rating and Senior Unsecured Debt rating of South Coast British Columbia Transportation Authority (TransLink or the Authority) at AA and its Commercial Paper rating at R-1 (middle). All trends are Stable. The ratings remain well supported by TransLink’s strong legislative framework, its effective financial management framework and practices, and the strong economic outlook for its service region.

TransLink continues to post positive operating results, reporting a surplus of $185.5 million in 2018, which was ahead of the prior-year result ($96.2 million), but somewhat weaker than budget expectations ($253.1 million). The weaker-than-expected results mainly reflect lower-than-expected fuel tax revenue and timing differences for government transfers.

The Authority’s 2019 Budget is similar to those of prior years, projecting a surplus of $189.2 million with considerable growth in demand and service offerings. Capex is also projected to rise strongly, as TransLink continues to implement the Mayors’ 10-Year Vision. Translink is undertaking a significant program to increase its service offerings and upgrade existing infrastructure. The current 10-Year Investment Plan (2018) contains $10.5 billion in capex and a commensurate increase in operational spending. It includes a fully integrated financial plan that incorporates planned revenue increases to meet rising operating and capital costs. The plan projects significant new debt needs, with DBRS’s measure of net tax-supported debt projected to rise to $5.3 billion in 2023 from $3.9 billion in 2018 (+34.8%). At the peak in 2023, the key financial ratios appear likely to remain commensurate with the current AA ratings, though some of the flexibility within the rating category will be diminished.

DBRS expects the ratings to remain stable through the medium term, as the ratings are well anchored by the critical rating factor assessment. DBRS could downgrade the Authority’s ratings if operating results deteriorate significantly on a sustained basis or if the debt burden rises significantly above current projections. DBRS does not believe that an upgrade is likely over the medium term because of anticipated debt growth.

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

The principal methodologies are Rating Canadian Municipal Governments and DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers, 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.

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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