TransEd downgraded by credit rating agency due to Valley Line SE delays

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A rating agency has downgraded TransEd Partners, the consortium responsible for building Edmonton’s Valley Line Southeast, due to continued LRT project delays.

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DBRS Morningstar said in a statement Thursday afternoon that it had downgraded TransEd’s issuer rating and Series A bond rating from BB (high) to BB — one notch lower on the rating scale. . The ratings are also currently being reviewed with negative implications, which the agency says may be cleared once LRT service begins.

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The change comes after TransEd announced in August that it had been forced to cancel the summer opening of the new line from downtown to Mill Woods after discovering cracks in at least 18 piers holding an elevated LRT track. That number has since risen to 21, or nearly half of the piers on the 13-kilometre line.

The delay has now passed the « long stop date » of October 31, which is considered a « termination event » under the project agreement between TransEd and the City of Edmonton. But no termination has taken place and talks are continuing.

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“DBRS Morningstar may take further negative rating action if discussions with the city and lenders do not conclude satisfactorily,” the credit reporting agency said in a statement.

« Furthermore, there is a greater likelihood of further downgrades if the time between the revised service start date and the date when liquidated damages or other sources of cash are expected to be exhausted, is significantly reduced. , or whether the exercise of rights by the parties should adversely affect (TransEd) or the rated debt.

The Valley Line Southeast is budgeted at $1.8 billion and its opening has been pushed back four times since its original scheduled opening in 2020.

It is still unclear when the Valley Line Southeast piers will be set and a new opening date may be set. In the company’s latest video update on October 6, TransEd CEO Ronald Joncas said that the analysis of the cause of the cracks was almost complete and that they were also close to finding a solution to the problem. problem.

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On Thursday, a spokesperson for TransEd said in an emailed statement that they remain committed to fixing the piers, and that there will be an update on the way forward « soon ».

“We want to assure people that our teams are working very hard to make sure the line opens soon and is safe,” TransEd communications manager Sameeksha Uniyal said.

« We are in regular contact with DBRS bondholders and the rating agency, so they understand the steps we are taking to complete the project and open this exciting project to the public. »

Adam Laughlin, deputy city manager of integrated infrastructure services for the city of Edmonton, said TransEd regularly briefs city officials on repair options.

The DBRS statement indicates that TransEd has indicated that some repair work has already begun and overall is currently 31% complete.

Under the public-private partnership (P3) contract for the SLR line, TransEd is responsible for the costs of the delay and repair work.

DBRS Morningstar said there were no defaults and no cash shortages were expected.

masmith@postmedia.com

@meksmith