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

DBRS Limited (DBRS Morningstar) confirmed Plenary Properties LTAP LP’s (ProjectCo) Issuer Rating 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 IT and lifecycle services to the Communications Security Establishment (CSE) 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 Morningstar) as represented by Defence Construction Canada (1951) Ltd. The LTAP facility consolidates services previously provided through four separate facilities by the CSE, Canada’s foreign intelligence and national cryptologic agency.

The project is in the sixth year of its 30-year service phase, after having reached substantial completion on July 31, 2014. Honeywell Limited (the Facilities Management (FM) Service Provider), with a parent guarantee from Honeywell International Inc. (rated “A” with a Stable trend by DBRS Morningstar), 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 Morningstar.

The project has maintained its sound operating performance record. Deductions during 2019, though higher than the previous year, are still considered low by DBRS Morningstar. The Coronavirus Disease (COVID-19) has had no material impact on the project operations; the service providers have some of the staff now working from home and have increased the focus on sanitization.

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 more than 60% and a minimum debt service coverage ratio (DSCR) of 1.23 times (x). ProjectCo reported a DSCR of 1.27x as of January 31, 2020, slightly higher than the ratio projected at financial close, mainly from savings in SPE costs. A positive rating action on the Bonds by DBRS Morningstar is unlikely. Prolonged weak service performance, giving rise to the requirement for contractor replacement, could lead to a negative rating action.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

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

The principal methodology is Rating Public-Private Partnerships, which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

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].

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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