Rating Action: Moody's assigns A2 underlying rating to Baglan Moor Healthcare PLC; outlook changed to stable
Global Credit Research - 12 Jan 2021
London, 12 January 2021 -- Moody's Investors Service ("Moody's") has today assigned an A2 senior secured underlying rating to the GBP 65.95 million 3.920% Guaranteed Secured Index-Linked Bonds due 2029 (the Bonds) issued by Baglan Moor Healthcare PLC (Baglan Moor). The outlook has been changed to Stable from No Outlook.
Baglan Moor is a special purpose vehicle which, in May 2000, entered into a 30-year project agreement (PA) with Abertawe Bro Morgannwg National Health Service Trust (the Trust) to design, build, finance and maintain a new 270 bed hospital (Neath Port Talbot Hospital) on the site in Port Talbot, South Wales. Following various reorganisations within the local National Health Service (NHS), the counterparty to the PA became Swansea Bay University Health Board (the Health Board).
Scheduled payments of principal and interest under the Bonds are unconditionally and irrevocably guaranteed by Assured Guaranty (Europe) plc (Assured Guaranty, A2 stable). The A2 underlying rating on the Bonds reflects the credit risk of the Bonds without the benefit of the financial guarantee from Assured Guaranty. The rating of the Bonds is determined as the higher of (1) the rating of Assured Guaranty; and (2) the underlying rating on the Bonds. Since Assured Guaranty's rating is equal to the underlying rating, the backed rating of the Bonds is A2.
The A2 senior secured underlying rating reflects the following credit strengths: (1) Baglan Moor's long-term PA with the Health Board to develop and then provide hard facilities management (FM) services at the Neath Port Talbot Hospital; (2) the credit strength of the Health Board supported by protective legislation; (3) a stable, availability-based revenue stream under the PA; (4) strong performance of FM services over the past 18 months, with reduced operating risk following removal of the soft FM service from the project's scope in 2009; and (5) a range of creditor protections are included within the financing structure, such as debt service and maintenance reserves.
The rating also incorporates the following credit weaknesses: (1) Baglan Moor's high leverage, which, whilst in line with peers, reduces its ability to withstand unexpected stress, (2) the credit profile of the Health Board as offtaker under the PA.
The stable outlook reflects our expectations that Baglan Moor will continue to perform its contractual services adequately and that the relationships among project parties will remain satisfactory.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
Moody's could consider upgrading the rating if the credit profile of the Health Board improved because of an upgrade of the UK sovereign rating.
Moody's could consider downgrading the rating if (1) lifecycle cost assumptions were to prove inadequate; (2) poor service delivery or a deterioration in Baglan Moors's relationship with the Health Board were to increase the possibility of a default under the PA; or (3) downwards pressure is exerted on the credit profile of the Health Board.
The principal methodology used in this rating was Operational Privately Financed Public Infrastructure (PFI/PPP/P3) Projects published in October 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1110140. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.
This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Kunal Govindia Vice President - Senior Analyst Infrastructure Finance Group Moody's Investors Service Ltd. One Canada Square Canary Wharf London E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Kevin Maddick Associate Managing Director Infrastructure Finance Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada Square Canary Wharf London E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454
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