DBRS Morningstar Confirms Plenary Health Hamilton LP at “A” with a Stable Trend

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating and Long Term Senior Bonds rating of Plenary Health Hamilton LP (ProjectCo) at “A” with Stable trends. ProjectCo is the special-purpose entity created to design, build, finance, and maintain a 305-bed mental health facility (the Project) under a 33-year public-private partnership with St. Joseph’s Healthcare Hamilton.

The Project successfully achieved substantial completion on the target date of December 6, 2013, and achieved final completion on December 22, 2017. The Project is now in its seventh year of the 30-year service phase, during which Honeywell Limited (the Service Provider) performs all facilities management (FM) services as well as lifecycle services on behalf of ProjectCo in order to return the facility to a state of good repair upon expiry of the Project Agreement. The facility operations continue to be stable, with failure points and deductions being well below the threshold levels. For the year ending March 31, 2019, the overall actual energy consumption was 3% higher than the target consumption levels, with the electricity and natural gas consumption being 20% lower and 32% higher than the discrete target levels, respectively. A six-month debt service reserve and the performance security provided by the Service Provider, which includes an LOC in an amount equal to one-half of the annual FM plus average lifecycle (indexed) costs, afford a modest cushion against unforeseen events during the service phase.

As of the last compliance certificate for the 12-month period ending November 30, 2019, the debt service coverage ratio (DSCR) was 1.25 times (x) and the projected DSCR was 1.21x. DBRS Morningstar also notes that per the compliance certificate for the 12-month period ending May 31, 2019, the actual DSCR was reported at 1.19x, which is slightly lower than the projected DSCR of 1.22x for the period. The slight difference between the actual and projected DSCRs was due to a $500,000 insurance revenue adjustment. While neither currently an issue nor expected to be an issue by DBRS Morningstar, material deductions on account of performance-related failures during the service phase could lead to a negative rating action. The potential for credit upside remains limited at the current ratings given the Project’s resiliency levels.

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 & Criteria.

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 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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrs.com.

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