DBRS Maintains Hospital Infrastructure Partners (NOH) Partnership Under Review with Negative Implications

DBRS Limited (DBRS) conducted its annual review of Hospital Infrastructure Partners (NOH) Partnership (ProjectCo). The rating of the Series A Senior Secured Bonds (the Bonds) remains Under Review with Negative Implications. DBRS acknowledges the successful implementation of corrective action and the significant progress made in the application of the operational improvement plan. Halton Healthcare Services Corporation (the Hospital), ProjectCo and Carillion Canada Inc., along with EllisDon Inc. (collectively, the Service Provider), have been working diligently and collaboratively toward achieving operational normalcy, i.e., as modelled and within specified parameters. However, there are still unresolved issues, especially in regards to energy management. DBRS is restricted in its ability to provide specific details, as it remains subject to a confidentiality agreement. DBRS will continue to monitor the situation and understands that the target deadline for resolving these issues is Q2 2018.

ProjectCo’s financial metrics continue to perform as expected, as deductions have been passed down to the Service Provider. Similarly, bondholders have been insulated by the same pass-down mechanism. Expectations for the near term are that any deductions that occur will continue to be passed down to the Service Provider and ProjectCo will continue to perform as forecast, with debt-service coverage ratios of 1.25 times.

During 2017, Carillion plc experienced financial hardships and is undergoing a strategic realignment of its operations. However, the Service Provider’s obligations are guaranteed on a joint and several basis by EllisDon Corporation and Carillion plc, which lends strong support to the Project and insulates the Project from Carillion plc’s creditworthiness.

DBRS could remove the ratings from Under Review with Negative Implications and assign a Stable trend in response to ProjectCo achieving steady state operations with benign levels of financial deductions or failure points. On the other hand, if some existing or new issues become permanent and material, leading to weakened financial metrics and impairment of resiliencies, DBRS could initiate a negative rating action.

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

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

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 info@dbrs.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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