DBRS Morningstar Confirms Rating on Kiewit Meridiam Partners LLC at A (low), Stable Trends

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating of Kiewit Meridiam Partners LLC (ProjectCo) at A (low) with a Stable trend. DBRS Morningstar also confirmed the ratings assigned to ProjectCo’s $120.8 million Private Activity Bonds (PABs; par and premium) and $416.0 million Transportation Infrastructure Finance and Innovation Act Loan (the 2017 TIFIA Loan) both at A (low) with Stable trends. ProjectCo is the special-purpose vehicle that is responsible for the design, construction, financing, operation, maintenance, and rehabilitation of Kiewit Meridiam Partners’ Central 70 Project (the Project), spanning a 10-mile section of the I-70 East highway in Denver, Colorado, that stretches from I-25 on the west end of the corridor to Tower Road on the east end of the corridor.

There are no material updates from the DBRS Morningstar press release of May 13, 2021, when DBRS Morningstar assigned provisional ratings of A (low) with Stable trends to the $465.7 million 2021 TIFIA Loan (the 2021 TIFIA Loan), the $36.8 million Senior Revenue Bonds Series 2021A (the Series 2021A Bonds), and the $465.7 million Senior Project Infrastructure Bonds Series 2021B (the Series 2021B Bonds). The financial close on these instruments is yet to take place. The Series 2021A Bonds and Series 2021B Bonds will be issued by Colorado Bridge Enterprise (BE) and loaned to ProjectCo. The 2017 TIFIA Loan will be repaid from the issuance of the new debt. The 2021 TIFIA Loan will be drawn only between June and December 2023 and will be used to repay the Series 2021B Bonds. (DBRS Morningstar deems ProjectCo to be the ultimate issuer of the PABs, Series 2021A Bonds, and Series 2021B Bonds because they are, or will be, issued by BE and the proceeds loaned to ProjectCo with repayment made from Project cash flows.)

The Project is in its 43rd month of construction. The Project is 76.3% complete based on progress up to May 31, 2021. Currently, the Revised Baseline Schedule 4, which has been approved by the Colorado Department of Transportation (CDOT), shows a delay of approximately 5.4 months for Milestone 5 and 3.0 months for substantial completion. The target dates were March 25, 2022, and September 21, 2022, respectively. The delays have decreased over the last few months, and the planned expenditure gap is currently only 3.3%. A material portion of the viaduct demolition, which was on the critical path, is complete.

The Memorandum of Settlement was executed on May 24, 2021 among Kiewit Meridiam Partners LLC, Kiewit Infrastructure Co., Colorado High Performance Transportation Enterprise (HPTE), and BE (HPTE and BE being divisions within CDOT. The Memorandum of Settlement provides for resolving 11 supervening events till the execution date, an increase in Project costs, extension of the construction completion timelines required under the Project Agreement, and increase of ProjectCo's debt (by $86.5 million under the current financial model). The amendments to the Project agreements, financial close of the new debt, and other requirements that are required to complete the process, are still to take place.

During the approximately 29-year service phase, starting on substantial completion, ProjectCo will subcontract its operating and maintenance (O&M) responsibilities to Roy Jorgensen Associates, Inc. (the Maintenance Contractor) for the first 10 years of the service phase (starting with substantial completion) under a fixed-price contract. Thereafter, ProjectCo can choose to either self-perform or renegotiate terms with the Maintenance Contractor for continued O&M of the Project’s infrastructure. The Project entails typical O&M activities relating to the roadway and covered portions below the top cover, including cleaning, sweeping, landscaping, and snow and ice removal. The minimum debt service coverage ratio during the operations phase remains 1.25 times (x) with a distribution cut off of 1.20x. The O&M resiliency of 120% and lifecycle resiliency of 38% are supportive of the ratings.

DBRS Morningstar will continue to monitor the construction progress of the Project. Any material delays may result in a negative rating action. A positive rating action is not expected at this time.

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 U.S. dollars unless otherwise noted.

The principal methodology is Rating Public-Private Partnerships (August 19, 2020; https://www.dbrsmorningstar.com/research/365975), 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.

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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