DBRS Confirms Plenary Health Bridgepoint LP at “A,” Stable Trend

DBRS Limited (DBRS) has today confirmed the rating of “A” with a Stable trend on the Senior Amortizing Bonds (Series A) issued by Plenary Health Bridgepoint LP (ProjectCo), the special-purpose entity created to design, build, finance and maintain a new 472-bed hospital and refurbish the adjacent old Don Jail for administrative purposes under a 33.6-year Project Agreement (PA) with Bridgepoint Hospital (the Hospital), one of Ontario’s largest complex care institutions.

The Project, which is now in its 45th month of operation, has been performing well with no major concerns. Substantial completion was achieved on March 3, 2013, and final completion on October 27, 2015. All lifecycle and facility management (FM) responsibilities under the PA have been passed down to Johnson Controls LP (JCLP or the Service Provider), and ProjectCo indicates that JCLP continues to perform these tasks to a high standard. ProjectCo also notes that JCLP maintains a good working relationship with the Hospital.

Availability payments have been as expected, without major penalties incurred. Energy consumption targets continue to be met, and ProjectCo indicated that no painshare adjustments have been imposed. For the 12 months ended August 31, 2016, failure points and deductions have been low. During this period, failure points were mainly related to an availability failure in July 2016 on account of water leakage, whereas deductions were mainly a result of availability failures related to mould remediation, kitchen countertop replacement and elevators. However, all issues have been addressed and deductions were fully passed down to JCLP. DBRS notes that the incidents are non-recurring.

ProjectCo’s financials have been tracking closely to initial projections, although as at August 2016, ProjectCo achieved a debt service coverage ratio (DSCR) of 1.17 times (x) on a trailing 12 months basis, which is lower than the previous year, because of a one-time payment of $0.9 million for management fees incurred for work resulting from scope changes during the construction phase. DSCRs are projected to return to the forecast 1.20x in 2017.

The Project has an FM resiliency of 78% and lifecycle resiliency of 87%, both of which are strong for the rating. The six-month debt service reserve and the performance security provided by the Service Provider afford a modest cushion against unforeseen events during the service phase.

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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.