DBRS Morningstar Confirms Accès Recherche Montréal L.P. at “A” with a Stable Trend

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating and Senior Secured Debt rating of Accès Recherche Montréal L.P. (ProjectCo) at “A” with Stable trends. ProjectCo is the special-purpose vehicle (SPV) created by Axium Recherche L.P. and Meridiam Infrastructure (SCA) SICAR to design, build, finance and maintain a new 68,431-square-metre research centre (the Project) under a 33.3-year public-private partnership with Centre hospitalier de l'Université de Montréal, one of the Province of Québec’s (rated A (high) with a Positive trend by DBRS Morningstar) largest health-care institutions.

The Project has been in operation for six years, and it has continued to perform well with minimal incurrence of failure points, which remain well below various contractual thresholds, resulting in stable operating and financial performance. The energy consumption in Energy Year 2 was in line with its energy target.

There are two notable construction-related issues that remain outstanding. DBRS Morningstar understands that the installation of the reverse osmosis water treatment system will be completed by the end of the year. The system is expected to rectify the recurring pre-corrosion-of-pipes issue. The second issue is related to the recurrence of the high vibration of the rooftop exhaust fans. ProjectCo indicated that Honeywell Limited (Honeywell; a subsidiary of Honeywell International Inc. (rated “A” with a Stable trend by DBRS Morningstar)) and the design-build joint venture are working toward a permanent solution to resolve the vibration issue. Overall, DBRS Morningstar believes these remaining construction-related issues do not pose a considerable risk to the operating performance of the Project, as both issues have not resulted in any incurrence of material failure points or deductions.

ProjectCo achieved annual debt service coverage ratios (DSCRs) of 1.39 times (x) in June 2019 and December 31, 2018, respectively. The higher-than-expected DSCRs were the result of a lower SPV cost than what was projected in the financial model. Furthermore, the Project’s debt-to-cash flow available for debt servicing in 2018 was about 8.3x. In accordance with the financial model at financial close, DBRS Morningstar expects the Project to continue to generate a minimum DSCR of 1.37x in the operating phase and strong projected operating and maintenance and lifecycle resiliencies of 127% and 115%, respectively.

DBRS Morningstar expects the Project to continue to perform in accordance with contractual specifications. DBRS Morningstar could take a negative rating action if the Project experiences significant operational challenges that result in a material accumulation of failure points or deductions. An upgrade to the ratings is unlikely in the near term as the Project’s operating and financial metrics are commensurate with the rating category.

Notes:
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 [email protected].

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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 [email protected].

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