DBRS Changes Trend on 407 East Development Group to Stable from Negative, Confirms BBB Rating

DBRS Limited (DBRS) has today confirmed the ratings assigned to the $120.4 million Long-Term Senior Bonds (the Long-Term Bonds) and the $450.9 million Short-Term Senior Bonds (the Short-Term Bonds) of 407 East Development Group General Partnership (ProjectCo) at BBB. The trend has been revised to Stable, from Negative, following the receipt of the substantial completion certificates on June 9, 2016. ProjectCo is the special-purpose entity created to design, build, finance, maintain and perform lifecycle obligations of the Highway 407 east extension (the Project) under a 33.6-year project agreement (PA) with the Province of Ontario (the Province; rated AA (low), Stable).

On June 9, 2016, ProjectCo received all three sections’ substantial completion certificates (Main Line Section, Crossing Roads Section and West Durham Link Section) and therefore achieved the overall Project substantial completion. This is about six months behind the original target date of December 18, 2015, but slightly ahead of the new target date of June 14, 2016, and the construction contractor longstop date of June 18, 2016. ProjectCo has received the $853.9 million of substantial completion payment, which has been used to fund major maintenance reserve and the debt service reserve account for the Long-Term Bonds and will be used to fully repay the Short-Term Bonds and the senior construction facility.

DBRS notes that although the PA sets the scheduled final completion date at March 16, 2016, it is not an event of default under the PA if ProjectCo fails to achieve final completion by such date. DBRS notes once the final completion is achieved with minimal ongoing payment deductions, further positive rating action is possible.

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

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 to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodology is Rating Public-Private Partnerships, which can be found on our website under Methodologies.