CHUM hospital PPP prices C$1.4bn bond offering

The project, which involves the construction of a 772-bed hospital in downtown Montreal, has reached financial close, marking the largest-ever bond offering for a Canadian PPP.

A greenfield hospital project in Québec has reached financial close, completing the largest bond offering to date for a Canadian public-private partnership (PPP).

The Centre Hospitalier de L’Université de Montréal (CHUM) said in a statement that it had signed a C$2 billion (€1.4 billion; $2.1 billion) agreement with the Collectif Santé Montréal consortium to design, build, finance, and maintain a new hospital in downtown Montreal.  The Collectif consortium is comprised of Laing O’Rourke, UK PPP investor Innisfree, Dalkia Canada and Spanish developer OHL.

The project involves the construction of a 21-storey, 772-bed hospital facility which is expected to open in 2016. It also includes a 30-year maintenance concession, according to a statement from Laing O’Rourke. CHUM expects to help finance the project through parking revenues and through its foundation.

The Collectif Santé Montréal consortium raised C$1.37 billion through the sale of secured bonds, and the consortium members will commit C$180 million of their own capital and subordinated loans, according to the statement. The bonds, solely underwritten by RBC Capital Markets, have an average tenor of 28.3 years and a 6.7 percent yield. 

To view the complete profile for the CHUM hospital project, please log on to Infrastructure Investor Assets, Infrastructure Investor’s companion database.

Moody’s rated the bonds Baa2. Canada's DBRS rated the bonds BBB+, citing the low credit risk for the project’s counterparties, which are CHUM and the province of Québec.

But DBRS said in a statement that “the project faces constraints, some of which are common to all PPPs but others which are more specific to the project,” including undertaking construction in a congested urban area adjacent to an existing hospital, another major construction project and a subway line. The normal PPP constraints include the project company’s “limited resources to handle unexpected shocks” over the life of the project.

The new CHUM hospital will be located at the same site as the new CHUM research centre, which is also being constructed as a PPP. A consortium sponsored by Canadian fund manager Fiera Axium Infrastructure and French fund manager Meridiam are constructing the C$585 million research centre, which was also financed through a mix of equity, short-term bonds, and amortising term bonds backed by availability payments, according to Meridiam’s website.