DBRS Limited (DBRS Morningstar) upgraded the rating of the Senior Secured Bonds (the Bonds) issued by The MaRS Development Trust (MaRS Trust or the Issuer) to AA (low) from A (high). The trend remains Stable. This upgrade follows DBRS Morningstar’s confirmation of the rating of the University Health Network (UHN) at AA (low) with a Stable trend. (See the DBRS Morningstar press release titled “DBRS Morningstar Confirms University Health Network at AA (low), Stable Trend,” published on July 22, 2022). Secured debt at UHN continues to decline in both nominal terms and as a share of total debt, and is expected to be fully amortized in F2023. As UHN is an investment-grade credit with the level of its secured debt relative to its total debt being less than 10% and no intention for this ratio exceed 10%, a one notch differential is no longer warranted. This hierarchy principle is contained in the DBRS Morningstar Credit Ratings Global Policy. The MaRS Trust rating also reflects the following factors: (1) the credit strength of UHN, which is responsible for servicing the Bonds through a credit tenant lease, and (2) a comprehensive security package that includes a charge on project assets, the UHN lease, various reserve accounts, and insurance policies.
The $100 million proceeds from the first and only bond issue of MaRS Trust were used to finance the acquisition of lands and the construction of the 400,000 square foot Princess Margaret Cancer Research Tower (previously the Toronto Medical Discovery Tower; the Project). Construction began in February 2003 and was completed in August 2005, with costs coming in slightly below budget. The Project has been leased to UHN for a period of 30 years, which corresponds to the term of the Bonds. During this time, UHN will provide rent payments sufficient to service the Bonds as well as cover all operating and maintenance costs.
The Project, along with other existing buildings on adjoining land, is part of an overall effort by MaRS Discovery District to establish a place where the academic, research, and business sectors from Canada’s science and technology industry can come together to help stimulate innovation, entrepreneurship, and the creation of successful global businesses. Given that the credit profile of MaRS Trust is linked to that of UHN, any revisions to the rating of the latter would trigger an equal move in the rating of MaRS Trust.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance (ESG) 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.
All figures are in Canadian dollars unless otherwise noted.
The principal methodology is the 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 (May 17, 2022; https://www.dbrsmorningstar.com/research/396929).
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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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