InfraAmericas Case Study: How Canada’s Jumbo CAD1.37bn CHUM PPP Bond Put Investors to the Test
In the past 12 months, Canada has once again reaffirmed its status as the market leader in North American PPPs by closing deals including the CAD1bn (USD1.05bn) Ottawa Communications Security Establishment Canada (CSEC) PPP in January this year, the smaller Thunder Bay Consolidated Courthouse at the end of 2010 and, more recently, the St. Joseph’s Healthcare Partnership PPP. But selling a CAD1.37bn (USD1.44bn) credit to investors in June was never going to be easy, even for a market with a proven track record in closing deals, and especially given that there was no precedent for a deal of that size.
The Centre Hospitalier de l’Universite de Montreal (CHUM) Collectif consortium, comprised of sponsors Innisfree (30%), OHL (25%), Laing O’Rourke (25%) and Dalkia (20%) and advised by Investec North America, had to be innovative in structuring the transaction. The project had some significant challenges including the sheer size of the hospital, the relatively constrained construction site in a downtown location and a phased construction program which is spread over approximately nine years, amongst others.
The CHUM Collectif consortium was selected to design and build a new state-of-the-art hospital centre comprised of 772 patient rooms, 39 operating rooms, 51 emergency stretchers and 320 examination rooms. Phase 1, which represents 90% of the clinical area of the hospital, is expected to be operational by early 2016. The final phase is expected to be completed by early 2020. RBC Capital Markets was the sole underwriter and bookrunner on the CAD1.37bn deal.
The deal was one of the largest PPPs ever funded in the Canadian market and was an especially tough sell because it notched a BBB (high) rating from Canadian credit rating agency DBRS. Bonds for a PPP deal of that size and carrying a rating of BBB (high) had never previously been brought to market. “We thought it was going to be like trying to fit an elephant into a compact car,” said one Canadian P3 banker. On Jun. 7, the consortium successfully issued and sold 38-year amortizing bonds due September 2049.
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