NewHospitals (St. Helens and Knowsley) Downgraded To 'BBB-' On Weaker Forecast Financial Profile; Outlook Stable
- U.K.-based special-purpose vehicle NewHospitals (St. Helens and Knowsley) Finance PLC (ProjectCo) is approaching the completion of construction works, which to date have been delivered on time and to budget.
- We recently received an operational phase financial model, which demonstrates that the project's financial profile is relatively sensitive to changes in operational and financial assumptions.
- Consequently, we are lowering to 'BBB-' from 'BBB' our long-term underlying ratings on ProjectCo's index-linked guaranteed secured bonds and European Investment Bank senior secured loan. We are also revising downward our recovery ratings on the bonds and loan to '3' from '2'.
- The stable outlook on the underlying ratings reflects our view that the remaining construction works will proceed according to plan and within budget, and that the project will continue to deliver a stable operational and financial performance.
LONDON (Standard & Poor's) Feb. 2, 2012--Standard & Poor's Ratings Services said today that it lowered to 'BBB-' from 'BBB' its underlying ratings on the £178.3 million index-linked guaranteed secured bonds (including £25.3 million of index-linked variation bonds) issued by U.K.-based special-purpose vehicle NewHospitals (St. Helens and Knowsley) Finance PLC (ProjectCo) and the £149.2 million index-linked guaranteed senior secured European Investment Bank (EIB; AAA/Negative/A-1+) loan. The outlook is stable. At the same time, we revised downward our recovery ratings on the bonds and loan to '3' from '2', indicating our expectation of meaningful (50%-70%) recovery of principal on the underlying debt (that is, in the absence of a payment guarantee) in the event of a payment default. The bonds maintain an unconditional and irrevocable guarantee of payment of scheduled interest and principal provided by Assured Guaranty (Europe) Ltd. (AGE; AA-/Stable/--). Under our criteria, a rating on a monoline-insured debt issue reflects the higher of the rating on the monoline and Standard & Poor's underlying rating (SPUR). Therefore, the long-term debt rating on the bonds reflects that on AGE. The downgrade reflects our view of the project's relative sensitivity to a variety of stress and breakeven scenarios on key operational and financial assumptions under the operational phase financial model. In our opinion, this demonstrates that the project has a less robust forecast financial profile than its peers rated in the 'BBB' category. That said, the project's current liquidity profile is stronger than that outlined in the financial close model, and we anticipate that the cash balance at the end of the construction phase will be in excess of the amount projected at financial close. The terms of the shareholder loan do not currently include a "Spens" clause, which would facilitate the withdrawal of the excess liquidity from the project. In our view, were such a clause to be introduced, most, if not all, of the outstanding cash balances would be paid out using this mechanism. The proceeds of the bonds and EIB loan were used to finance the design, construction, operation, and maintenance of two hospital facilities at the St. Helens and Delph Lane, Prescot (Whiston) sites under a private finance initiative agreement. The overall construction period is five years, and the contractual completion date is June 2012. In our view, the remaining construction works will proceed according to plan and within budget, and the project will continue to deliver a stable operational and financial performance. We could lower the SPURs if the project's operational performance were to weaken significantly, resulting in a substantial increase in performance-related deductions or the issue of a warning notice by the Trust, for example. We could also take such an action if there were a material decline in the project's financial or liquidity profile, which could arise following the introduction of a "Spens" clause into the terms of the shareholder loan and the subsequent distribution of funds to shareholders. Although we consider the likelihood of a positive rating action on the SPURs to be more limited, an improvement in the project's financial profile could result in such a move. The outlook on the monoline-insured debt rating reflects that on AGE and will move in line with that rating. RELATED CRITERIA AND RESEARCH All articles listed below are available on RatingsDirect on the Global Credit Portal, unless otherwise stated.
- Project Finance Construction and Operations Counterparty Methodology, Dec. 20, 2011
- Updated Project Finance Summary Debt Rating Criteria, Sept. 18, 2007
- Recovery Ratings For Project Finance Transactions, April 8, 2005
Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. Alternatively, call one of the following Standard & Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow 7 (495) 783-4009.
| Primary Credit Analyst: | Robin Burnett, London (44) 20-7176-7019; robin_burnett@standardandpoors.com |
| Secondary Contact: | Jose R Abos, Madrid (34) 91-389-6951; jose_abos@standardandpoors.com |
| Additional Contact: | Infrastructure Finance Ratings Europe; InfrastructureEurope@standardandpoors.com |
No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.
Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: research_request@spglobal.com.