DBRS Confirms Rating of Accès Recherche Montréal L.P. at A (low)

DBRS Limited (DBRS) has today confirmed the rating on the Senior Secured Debt of Accès Recherche Montréal L.P. (ProjectCo) at A (low) with a Stable trend. ProjectCo is the special-purpose vehicle 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 (PPP) with the Centre Hospitalier de l’Université de Montréal, one of Québec’s largest health-care institutions.

The Project achieved Substantial Completion on September 30, 2013, as scheduled, and achieved Final Completion on June 3, 2016. The achievement of Substantial Completion in 2013 marked the beginning of the 30-year service phase, during which Honeywell Limited (the Service Provider; rated R-1 (low) by DBRS, a subsidiary of Honeywell International Inc., rated “A” with a Stable trend) performs all facilities management services, including lifecycle, on behalf of ProjectCo. The Project, now more than three years into its service phase, has been performing in line with expectations with only nominal service payment deductions that were ultimately passed down to the Service Provider on a back-to-back basis. Consistent with previous years, minor failures occurring recently have largely been attributed to an elevator unavailability event, help desk calls being unanswered within the required timeframes and occupants being unhappy with room temperature levels, that have since been addressed.

ProjectCo achieved annual debt service coverage ratios (DSCR) of 1.38 times (x) in Q2 2016, and 1.37x at year-end December 31, 2015, both in line with projected DSCRs of 1.37x for the periods at financial close. Financial projections for the service phase remain unchanged, with projected debt-to-cash flow available for debt servicing of 8.6x by the end of the third year of service, a projected minimum DSCR of 1.37x over the term of the service phase and strong projected operating and maintenance and lifecycle resiliencies of 127% and 115%, respectively. Although the projected DSCR, operating and maintenance and lifecycle resiliencies are somewhat higher than most other Canadian bond-financed PPPs in recent years and relative to the rating category, the rating remains constrained by the rating of Province of Québec of A (high), which meets DBRS’s requirement, as per the methodology, of at least two notches above the rating of ProjectCo’s debt.

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 (March 2016), which can be found on our website under Methodologies.