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 confirmation of its ratings on the Province of New Brunswick (the Province) at A (high) with Stable trends on May 11, 2021. 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 December 17, 2021, commentary “2022 Canadian Provincial and Territorial Government Outlook,” DBRS Morningstar noted that the Province’s credit profile appears to have deteriorated to a lesser extent compared with most provincial peers as a result of past efforts to address fiscal imbalances and slow debt growth. While the ongoing evolution of the Coronavirus Disease (COVID-19) pandemic leads to heightened economic uncertainty, the use of conservative forecast assumptions, the recent track record of outperformance, the accelerated vaccine roll-out, and a strong recovery in the U.S. point to the credit profile remaining intact.
As DBRS Morningstar stated in its May 2021 ratings confirmation of the Province, a negative rating action to the Province could result from a sustained deterioration in operating results, a marked increase in the debt-to-GDP ratio beyond expectations, and/or New Brunswick Power Corporation (NB Power) failing 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 to the Province 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.
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.
All figures are in Canadian dollars unless otherwise noted.
The principal methodology is DBRS Morningstar Criteria: Guarantees and Other Forms of Support (April 4, 2022; https://www.dbrsmorningstar.com/research/394683), 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).
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.
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