Research Update: BY Chelmer 'BBB-'Senior Secured Debt Rating And SPUR Affirmed; Outlook Stable

We expect U.K.-based BY Chelmer (ProjectCo) to maintain stable operational and financial performance. There has been a temporary breach of the contractual warning notice (WN) threshold by the high service failure points (SFPs) in November 2023, for which the Mid and South Essex Hospital Services NHS Trust (the Trust; formerly Mid Essex Hospital Services NHS Trust) has not yet issued a WN. Following this, however, the SFPs have normalized and remained within the WN thresholds. Therefore, we think the risk of triggering the event of default (EoD) clause under the project agreement is remote. This is further supported by the collaborative relationship between the Trust and ProjectCo. We forecast ProjectCo's minimum annual debt service coverage ratio (ADSCR) of 1.08x will

...- We expect U.K.-based BY Chelmer (ProjectCo) to maintain stable operational and financial performance. - There has been a temporary breach of the contractual warning notice (WN) threshold by the high service failure points (SFPs) in November 2023, for which the Mid and South Essex Hospital Services NHS Trust (the Trust; formerly Mid Essex Hospital Services NHS Trust) has not yet issued a WN. - Following this, however, the SFPs have normalized and remained within the WN thresholds. Therefore, we think the risk of triggering the event of default (EoD) clause under the project agreement is remote. - This is further supported by the collaborative relationship between the Trust and ProjectCo. - We forecast ProjectCo's minimum annual debt service coverage ratio (ADSCR) of 1.08x will remain resilient, although with limited headroom for underperformance, with all the levied deductions continuing to be passed through to the subcontractor. - Hence, we affirmed our '###-' issue rating and our S&P...

Research Update