Morningstar DBRS Confirms Credit Ratings on Women's College Partnership at 'A' With Stable Trends

Published: 2026-05-04 06:09:09 ET JLL

Published on 05/04/2026 at 06:09 am EDT

DBRS Limited (Morningstar DBRS) confirmed Women's College Partnership's (ProjectCo) Issuer Rating and the credit rating on the $207.3 million Senior Secured Bonds (the Bonds) at 'A' with Stable trends.

ProjectCo is the special-purpose entity (SPE) created for the design, construction, financing, maintenance, and rehabilitation of Women's College Hospital (the Project or the Hospital) in Toronto under a Project Agreement (PA) with the Hospital for a term of 30 years from scheduled interim completion. The Project achieved interim completion on May 14, 2013; substantial completion on September 24, 2015; and final completion on April 4, 2019. The 30-year operating phase began on the achievement of interim completion. ProjectCo has subcontracted its operating and maintenance (O&M) responsibilities under the PA to Black & McDonald Ltd. (BML or the Service Provider) under a fixed-price, full-term service contract. However, the lifecycle risk is retained by ProjectCo.

The credit rating confirmations stem from the Project's stable operating and financial performance with modest failure points and deductions recorded in 2025 and the first three months of 2026. According to ProjectCo, the debt service coverage ratio (DSCR) for the 12 months ended March 2026 was 1.43 times (x).

KEY CREDIT RATING CONSIDERATIONS

The Project has been in operation for more than 10 years and the operating performance in 2023-25 remains relatively stable with minimal incurrence of failure points during this period. For the first three months of 2026, the Project has continued to perform well without experiencing any material operating and maintenance issues, and the failure points accrued were well below the contractual thresholds.

Jones Lang Lasalle Incorporated (JLL) performed a second joint technical review (JTR) of the Project in January 2025. (The first JTR was published in 2019.) The report noted that the building structure, shell, and interiors are generally in good to fair condition. JLL further noted that there are concerns regarding some of the mechanical systems (e.g., sprinkler, domestic water distribution, sanitary lines, variable frequency drives (VFDs), and uninterruptible power supply (UPS) that JLL assesses as high risk of failure that needed to be addressed by the Service Provider. ProjectCo confirmed that the Service Provider is executing its action plan to address all the critical items that were in the JTR by either replacing the affected components and/or increasing preventative maintenance to mitigate the risk of failure.

The concern regarding the VFDs associated with the air handling units (AHUs) relates to the risk of future equipment malfunction because these are normally running at full capacity. The Service Provider has replaced more than 70% of the VFDs since 2025, and the remaining VFDs will be replaced in 2026. In addition, the replacement of UPS was completed in Q4 2025. According to ProjectCo, the sanitary lines, domestic water distribution system, and the sprinkler system are all working normally after the Service Provider increased the maintenance frequency on these systems and replaced the damaged pipes.

According to the Lenders' Technical Advisor (LTA)'s first lifecycle look-forward test and building condition assessment report dated May 2025, the LTA believes ProjectCo's five-year lifecycle budget (included the lifecycle costs to address the issues outlined in the JTR) is sufficient to cover the lifecycle requirements for the next five years (2025-29). The LTA further notes that there is no lifecycle deficit amount that is required to be funded by ProjectCo because there is sufficient remaining lifecycle payment to cover the projected lifecycle cost to meet handback requirements.

ProjectCo indicated that the Project's actual annual energy consumption in 2025 was lower than the annual energy target; thus, the Service Provider received an energy gainshare amount from the Hospital.

CREDIT RATING DRIVERS

A positive credit rating action is unlikely because ProjectCo is not expected to materially outperform its financial projection on a sustained basis based on the contractual structure of the agreements with the Hospital and the Service Provider. Morningstar DBRS could take a negative credit rating action if ProjectCo were to incur significant failure points as a result of a material deterioration in its operating performance. Furthermore, a persistently higher-than-expected lifecycle cost may result in a material deterioration of the financial metrics, which may lead to a negative credit rating action.

FINANCIAL OUTLOOK

For the year ended September 2025, the DSCR of 1.42x was slightly lower than the projected DSCR of 1.44x. Morningstar DBRS noted previously that the Service Provider and ProjectCo increased the lifecycle budget in 2025-28 to address the concerns noted in the JTR by bringing forward some of the lifecycle tasks that were projected later in the financial model. As a result of this shift, there has been a modest decline in the DSCR. Despite this, Morningstar DBRS further notes that the total lifecycle cost remains unchanged at $47.6 million (in 2010 real dollars). In addition, ProjectCo has access to a Lifecycle Reserve Account that has a balance of $4.8 million as of March 31, 2026. For the year ended March 2026, ProjectCo's DSCR was 1.43x.

According to ProjectCo's five-year lifecycle budget (2026-30), the total lifecycle cost during this period is projected to remain slightly less than the financial model projection at around $14.0 million. In addition, the accumulated unspent lifecycle amount in 2014-25 will provide ProjectCo additional liquidity in the event the lifecycle cost in 2026-30 exceeds the budgeted amount. The Project's minimum DSCR of 1.44x, coupled with O&M resilience of 83.9% and lifecycle resilience of 76.5%, continues to support the 'A' credit ratings.

CREDIT RATING RATIONALE

Comprehensive Business Risk Assessment (CBRA): a/a (low)

The CBRA of a/a (low) reflects both strengths and challenges:

The credit ratings are underpinned by the following strengths: (1) there are generally fewer maintenance complexities for ambulatory care and teaching facilities than those typically associated with acute-care facilities; and (2) an early look-forward lifecycle assessment of the Project that will require ProjectCo to fund any lifecycle deficit amount through the cash flow waterfall. Conversely, ProjectCo is exposed to lifecycle risk such that if there is an unexpected material increase in lifecycle cost that exceeds the available lifecycle payment and lifecycle reserve amount, it could potentially erode the financial resiliencies of the Project materially. However, Morningstar DBRS notes that the results of the first look-forward lifecycle assessment indicate that the remaining lifecycle payments from the Hospital are sufficient to cover the projected lifecycle cost to meet handback requirements.

Comprehensive Financial Risk Assessment (CFRA): 'a'

The CFRA of 'a' is primarily underpinned by a lifecycle cost resilience of 76.5%. In addition, ProjectCo is expected to generate a minimum DSCR of 1.44x.

Intrinsic Assessment (IA): 'a'

The IA of 'a' is the weighted average of the CBRA and CFRA on a 35/65 split, also taking into consideration the current credit rating trend and peer comparisons, among other factors.

Additional Considerations: None

The credit ratings include no further negative or positive adjustments because of additional considerations.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) at https://dbrs.morningstar.com/research/454196.

Further details on the Issuer's Intrinsic Assessment can be found at https://dbrs.morningstar.com/research/480197.

Notes:

All figures are in Canadian dollars unless otherwise noted.

Morningstar DBRS applied the following principal methodology:

Global Methodology for Rating Public-Private Partnerships (March 10, 2026), Operating Phase Sector - Availability-Based PPPs-BRA Grid and Additional Information, Operating Phase Sector - Availability-Based PPPs-FRA Grid Supplements

https://dbrs.morningstar.com/research/476032

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (December 19, 2025; https://dbrs.morningstar.com/research/470156), which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodology has also been applied:

Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196

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

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

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 [email protected].

The credit rating was initiated at the request of the rated entity.

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

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

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

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

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com or contact us at [email protected].

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