DBRS Morningstar Finalizes Ratings on Kiewit Meridiam Partners LLC at A (low) With Stable Trends

DBRS Limited (DBRS Morningstar) finalized the provisional ratings of A (low) with Stable trends on the following debt instruments issued by Kiewit Meridiam Partners LLC (ProjectCo):
-- $465.0 million 2021 Transportation Infrastructure Finance and Innovation Act Loan (the 2021 TIFIA Loan)
-- $51.7 million Senior Revenue Bonds Series 2021A (the Series 2021A Bonds)
-- $465.0 million Senior Project Infrastructure Bonds Series 2021B (the Series 2021B Bonds)

DBRS Morningstar discontinued the rating on the following as it is has been repaid:
-- $416.0 million Transportation Infrastructure Finance and Innovation Act Loan (the 2017 TIFIA Loan).

DBRS Morningstar also has outstanding ratings of A (low) with Stable trends on the following:
-- Issuer Rating of Kiewit Meridiam Partners LLC
-- ProjectCo’s $120.8 million Private Activity Bonds (PABs; par and premium)

ProjectCo is the special-purpose vehicle responsible for the design, construction, financing, operation, maintenance, and rehabilitation of Kiewit Meridiam Partners’ Central 70 Project (the Project), spanning a 10-mile section of the I-70 East highway in Denver, Colorado, that stretches from I-25 on the west end of the corridor to Tower Road on the east end. The financial close on the instruments on which the provisional ratings were assigned has been delayed and is now expected to take place in September 2021.

The Series 2021A Bonds and Series 2021B Bonds were issued by Colorado Bridge and Tunnel Enterprise (BE, previously Colorado Bridge Enterprise) and loaned to ProjectCo. The 2017 TIFIA Loan and capitalized interest were repaid from the proceeds of the Series 2021B Bonds and Series 2021A Bonds respectively. The 2021 TIFIA Loan can be drawn only on or after June 28, 2023 (and up to December 26, 2023) and will be used to repay the Series 2021B Bonds maturing on December 31, 2023. (DBRS Morningstar deems ProjectCo to be the ultimate issuer of the PABs, Series 2021A Bonds, and Series 2021B Bonds because they are issued by BE and the proceeds loaned to ProjectCo with repayment made from Project cash flows.) ProjectCo’s debt increased by $100.6 million, and financial metrics are supportive of the ratings.

The fourth amendments to the Project Agreement and Construction Contract were executed on September 14, 2021, in accordance with the Memorandum of Settlement executed on May 24, 2021, among Kiewit Meridiam Partners LLC, Kiewit Infrastructure Co., Colorado High Performance Transportation Enterprise (HPTE), and BE (HPTE and BE being divisions within CDOT). The Memorandum of Settlement provided for resolving 11 supervening events until the execution date, an increase in Project costs, an extension of the construction completion timelines required under the Project Agreement, and an increase of ProjectCo's debt.

The Project is in its 44th month of construction and is 79.3% complete, based on the progress made to July 31, 2021. The delays have been decreasing over the past few months. A material portion of the viaduct demolition, which was on the critical path, is complete. Along with extensions to certain milestone completion dates, the target substantial completion date has been extended by approximately five months to February 16, 2023, which is also the currently expected substantial completion date, addressing delays to date.

During the approximately 29-year service phase, starting on substantial completion, ProjectCo will subcontract its operating and maintenance (O&M) responsibilities to Roy Jorgensen Associates, Inc. (the Maintenance Contractor) for the first 10 years of the service phase (starting with substantial completion) under a fixed-price contract. Thereafter, ProjectCo can choose to either self-perform or renegotiate terms with the Maintenance Contractor for the continued O&M of the Project’s infrastructure. The Project entails typical O&M activities relating to the roadway and covered portions below the top cover, including cleaning, sweeping, landscaping, and snow and ice removal. The minimum debt service coverage ratio during the operations phase remains 1.24 times (x) with a distribution cut-off of 1.20x. The O&M resiliency of 114% and lifecycle resiliency of 36% are supportive of the ratings.

With respect to future rating actions, any material delays may result in a negative rating action. A positive rating action is not expected at this time.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating Public-Private Partnerships (August 19, 2021; https://www.dbrsmorningstar.com/research/383244), which can be found on dbrsmorningstar.com under Methodologies & Criteria. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021; https://www.dbrsmorningstar.com/research/373262).

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.

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

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