DBRS Morningstar Confirms Ratings on New Brunswick (F-M) Project Company Inc. at A (high), Stable

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Highway Bonds and the Tranche A and Tranche B Senior Toll-Based Debt (collectively, the Senior Debt) of New Brunswick (F-M) Project Company Inc. (NBFM or the Company) at A (high) with Stable trends. This rating confirmation is based on DBRS Morningstar’s current rating on the Province of New Brunswick (the Province) at A (high) with Stable trends, which was confirmed on May 8, 2020. The ratings on the Senior Debt are a flow-through of the Province’s long-term rating as the New Brunswick Highway Corporation, a provincial Crown agent, directly funds the principal and interest payments on the Senior Debt. Although the transaction is structured as a public-private partnership (PPP), revenue available to service the Senior Debt is not subject to traffic volumes or abatement for the Company’s performance and continues if the route is unavailable. Debt servicing also survives termination of the Company under the Project Agreement.

In its March 17, 2021, commentary, “Province of New Brunswick Budget 2021 – Credit Profile Remains Intact” DBRS Morningstar noted that past efforts to address fiscal imbalances and slow debt growth are paying dividends. New Brunswick, like all provinces, continues to grapple with the economic and health impacts of the coronavirus pandemic and has budgeted for deficits over the medium term, but these deficits are expected to be very manageable and debt-to-GDP will remain below prior peaks. This is a very favourable position in comparison with most provincial peers. As such, the overall outlook for the Province's credit profile remains intact.

As stated at the time of the May 2020 ratings confirmation, a negative rating action could result from a sustained deterioration in operating results, a marked increase in the debt-to-GDP ratio beyond expectations, and/or NB Power's failure to reduce leverage, causing DBRS Morningstar to no longer treat NB Power as self-supported. Even prior to the coronavirus pandemic, a positive rating action was considered unlikely, as the ratings were constrained by New Brunswick's weak economic fundamentals.

NBFM is a not-for-profit corporation created to design, build, finance, operate, and maintain a portion of the Trans-Canada Highway between Fredericton and Moncton in New Brunswick under a 30-year PPP structure.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262

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

The principal methodologies are Rating Public-Private Partnerships (August 19, 2020, https://www.dbrsmorningstar.com/research/365975) and DBRS Morningstar Criteria: Guarantees and Other Forms of Support (January 14, 2021, https://www.dbrsmorningstar.com/research/372344), which can be found on dbrsmorningstar.com under Methodologies & Criteria. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021, https://www.dbrsmorningstar.com/research/373262).

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

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@dbrsmorningstar.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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

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

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

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