NOTE: On August 28, 2020, the press release was corrected as follows: The eighth paragraph of the REGULATORY DISCLOSURES section was removed. Revised Release follows.
Toronto, April 28, 2020 -- Moody's Investors Service ("Moody's") has today
upgraded Société en commandite CE Sebastopol / CE Sebastopol
LP's (the Partner) senior secured rating to A2 from A3. The
rating outlook has been changed to positive from stable.
RATINGS RATIONALE
The rating action is prompted by the Partner's smooth transition
to its operating period following the recently achieved Substantial Completion
in November 2019, Final Completion in December 2019 and our belief
that the Partner will continue to deliver operating results in accordance
with the original financial projections owing to our benign view of project's
operating profile. The rating action considers that the Partner
benefits from availability payments from the Réseau de Transport
Métropolitain (RTM) that are only subject to deductions for unavailability
and performance failures. The RTM plans and coordinates large transit
infrastructure projects in the metropolitan Montreal area and the new
facility is essential for the RTM to accommodate traffic and route growth
in greater Montreal, a consideration into today's rating action.
We view the operating period obligations to be straightforward building
maintenance services with standard performance requirements and the Partner
has transferred its service and lifecycle maintenance obligations to a
strong and experienced entity in Johnson Controls Canada LP (the Service
Provider) on a back-to-back basis. In addition,
the rating action acknowledges the adequate financial metrics and standard
financing structure for a Canadian public-private partnership (P3)
transaction.
Substantial Completion was delayed by 21 months due to the RTM's
work suspension order in 2016 and a subsequent variation directive issued
in 2017 modifying the project scope. Despite the delay, the
RTM paid the Substantial Completion payment as originally scheduled and
has since been making monthly availability payments in accordance with
the original financial model (less O&M payments). As such,
we view the construction delay to be credit neutral.
RATING OUTLOOK
The outlook is positive reflecting our expectation that the Partner will
continue to receive its monthly availability payments with minimal deductions
and will generate its planned DSCRs in accordance with the original financial
model. The positive outlook also considers our credit assessment
of RTM, which has institutional and financial linkages to the Province
of Quebec (Aa2 stable).
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
FACTORS THAT COULD LEAD TO AN UPGRADE
• The rating could be upgraded once the Project has demonstrated
a consistent and sustained track record of strong operations with minimal
deductions to the monthly availability payments, and our view of
RTM remains unchanged.
FACTORS THAT COULD LEAD TO A DOWNGRADE
The rating could be downgraded if:
• the RTM's credit quality deteriorates materially to the point that
it constrains the credit quality of the Partner;
• persistent inability of the Service Provider to meet the established
performance requirements or a material weakening of its parent company
guarantee from Johnson Controls International plc (JCI, Baa2 stable);
• the providers of the letters of credit are downgraded below A3
and are not replaced in a prompt manner;
• the DSCR is below 1.20x on a sustained basis.
PROFILE
Société en commandite CE Sébastopol / CE Sébastopol
Limited Partnership is a single purpose limited partnership that has entered
into a Project Agreement with RTM (formerly AMT) to design, build,
finance, maintain and rehabilitate a new train maintenance centre
(the Project). The Project is located in the Pointe-Saint-Charles
area in the south-west sector of the city of Montréal,
Québec. The initial scope was to comprise of a day garage,
maintenance shop, automatic train wash, test shops,
wheel profiling and exterior maintenance buildings covering an area of
250,000 square feet. Substantial Completion was achieved
on November 18, 2019 with a subsequent 28-year operating
period now underway. All construction obligations were passed down
to a design-build joint venture established by Pomerleau Inc.
and Kiewit Construction Cie. All of the operating period obligations
have been passed down to Johnson Controls Canada LP.
The principal methodology used in this rating was Operational Privately
Financed Public Infrastructure (PFI/PPP/P3) Projects published in October
2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1110140.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
This rating is solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Rebecca Adair
Vice President - Senior Analyst
Project Finance Group
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
A.J. Sabatelle
Associate Managing Director
Project Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653