DBRS Morningstar Confirms Ratings on Kiewit Meridiam Partners LLC at A (low) with 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 on the following debt instruments issued by ProjectCo at A (low) with Stable trends:
-- $120.8 million Private Activity Bonds (par and premium);
-- $465.0 million 2021 Transportation Infrastructure Finance and Innovation Act Loan;
-- $51.7 million Senior Revenue Bonds Series 2021A; and
-- $465.0 million Senior Project Infrastructure Bonds Series 2021B.

ProjectCo is the special-purpose vehicle 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 that stretches from I-25 on the west end of the corridor to Tower Road on the east end.

The Project achieved substantial completion on February 16, 2023, as scheduled, leading to the start of the service phase. Overall completion is at 99.97% based on the progress made to February 25, 2023. The remaining work is topsoil placement and final landscaping activities, which were scheduled to be completed in the spring planting season of 2023 but are still ongoing because of an extremely wet spring. Punch list work continues projectwide and will be complete prior to final acceptance expected on July 29, 2023. Operations are progressing well as the Project transitions to operating and maintenance (O&M) from construction. There were $50,000 in nonpermitted closure deductions assessed in May 2023 for a rolling closure that was during the day instead of at night and four noncompliance points were assessed as of June 2023, which were all passed through to Roy Jorgensen Associates, Inc. (Jorgenson or the Maintenance Contractor). At this time, all reserve accounts have been fully funded.

For the first 10 years of the service phase (started on February 16, 2023, at substantial completion), ProjectCo subcontracts its O&M responsibilities to Jorgenson under a fixed-price contract. Thereafter, ProjectCo can choose to either self-perform or renegotiate terms with the Maintenance Contractor for the 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 operation phase remains 1.24 times (x) with a distribution cut-off of 1.20x. The O&M resiliency of 114% and lifecycle resiliency of 36% support the ratings.

Regarding future rating actions, any material delays in achieving final acceptance may result in a negative rating action. DBRS Morningstar notes that, even if the nonachievement of final acceptance by itself is not a breach, the noncompliance points associated to it would constitute a breach in two months from the Final Acceptance Deadline Date (July 29, 2023). A positive rating action is not likely at this time.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no environmental, social, and governance factors that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).

Notes:
All figures are in U.S. dollars unless otherwise noted.

DBRS Morningstar applied the following principal methodology:
-- Global Methodology for Rating Public-Private Partnerships (August 30, 2022; https://www.dbrsmorningstar.com/research/402155)

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/397223/interplay-of-global-corporate-finance-rating-methodologies-when-analyzing-corporate-finance-transactions.

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 rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

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

DBRS Morningstar will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at info@dbrsmorningstar.com.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577