DBRS Confirms Women’s College Partnership at “A” with Stable Trends

DBRS Limited (DBRS) confirmed Women’s College Partnership’s (ProjectCo) Issuer Rating, initially assigned on November 15, 2018, as well as the rating on the $207.3 million Senior Secured Bonds at “A” with Stable trends. ProjectCo is the special-purpose entity created for the design, construction, financing, maintenance and rehabilitation of Women’s College Hospital (the Project) in Toronto under a Project Agreement (PA) with Women’s College Hospital (WCH or the Hospital) for a term of 30 years from scheduled interim completion.

The Project achieved interim completion on May 14, 2013; substantial completion on September 24, 2015; and final completion on April 4, 2019. The 30-year operating phase began on the achievement of interim completion. ProjectCo has subcontracted its operating and maintenance (O&M) responsibilities under the PA to Black & McDonald Ltd. (the Service Provider) under a fixed-price, full-term service contract. Lifecycle risk is retained by ProjectCo.

Operational performance since interim completion has generally been good with a relatively low level of failure points and deductions related to service performance. There have been some instances of elevator unavailability, though relief granted by the Hospital reduced the applicable deductions. During 2018, failure points totalled 1,878 and deductions amounted to approximately $158,000, both after relief granted by the Hospital. During the first seven months of 2019, failure points totalled 924, while deductions amounted to approximately $32,000. DBRS notes that the levels are significantly lower than the PA’s monitoring threshold and the deductions incurred have been passed on to the Service Provider, so there has been no impact on payments to ProjectCo or Bondholders.

ProjectCo is working with the Construction Contractor to close out three minor warranty items. The base year assessment for energy pain-share/gain-share is not yet established and there has been no adjustment in monthly service payments to ProjectCo because of energy usage to date. ProjectCo indicated that the relationship among WCH, ProjectCo and the Service Provider is good without any ongoing disputes. The Project features a minimum DSCR of 1.44 times (x) with an equity lock-up of 1.15x, O&M resilience of 83.9% and lifecycle resilience of 76.5%, which support the “A” ratings. While a positive rating action is unlikely, negative rating pressure could result from material deterioration in ProjectCo’s operating and financial performance.

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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