Client: Interior Health Authority

Location: Kamloops, British Columbia, Canada
Delivery Model: Design-Build-Finance-Maintain

Size: 288,472 sq. ft.

Value: $417 million

Project Highlights

• 2018 North American Social Infrastructure Deal of the Year at the Infrastructure Journal Global Awards.
• The first project to achieve official Green Bond accreditation through the International Capital Markets Association.
• Designed and built to achieve LEED® certification.
• Compliance with British Columbia’s Wood First Act.
• Compliance with all applicable codes, standards, and guidelines of British Columbia’s Hydro High-Performance Building Program, PowerSmart. There is potential for 50,000 kWh per year in electrical reductions.

EllisDon Capital acted as the financial advisor to develop and implement an innovative and highly efficient financing solution. EDC arranged two series of fixed-rate broadly-marketed bonds underwritten by HSBC (Securities) Canada Inc. The debt solution provided by EllisDon Capital and HSBC Securities (Canada) Inc. had several innovative features not often seen on broadly-marketed bond issuances:

• Green Bonds—both series of project bonds were certified by an independent third-party technical advisor, aligning with the International Capital Market Association’s Green Bond Principles 2018. The RIH PCT Project is one of only a few green bond financings in Canada. The green bond financing status was successfully achieved based on the following project characteristics:
  • Achieving LEED® Gold certification;
  • A design and construction energy target that will reduce energy use; and
  • Compliance with the Wood First Act, which promotes the use of wood for construction in British Columbia.
• International Investor—Although the bonds could have been sold entirely to Canadian investors, EllisDon Capital engaged overseas legal counsel to provide the necessary securities law opinions that allowed a major investor from the United Kingdom to join the investor pool. This was a major success not only for the RIH PCT Project but for the broader Canadian P3 debt market, as it opens the door for further investment by this firm (and other foreign investors) going forward.
• Security Package—EllisDon Capital structured a construction security package that made use of a Performance Plus Bond offered by EllisDon’s sureties. With several advantages over the traditional letter of credit, this structure earned the project bonds an A3 rating from Moody’s and was very well-received by investors.
• Repayment Frequency—the RIH PCT Project bonds made use of monthly payment frequency, a highly efficient structural feature more akin to bespoke credit facilities and narrowly-marketed deals.

As the Financial Advisor for the EllisDon Infrastructure Healthcare consortium, EllisDon Capital met with various challenges on the RIH PCT Project to develop a financing solution that would bring efficiencies and cost savings to the client, Interior Health.

With a relatively small amount of long-term debt (approximately $150 million), EllisDon Capital was challenged to structure efficient financing that overcame the fixed costs associated with a rated transaction. During the procurement period, there was a significant amount of volatility in the financial markets, in addition to a smaller supply of products for end investors. EllisDon Capital competed a narrowly-marketed private placement against a broadly-marketed underwritten solution, and under most circumstances, the narrowly marketed solution would likely have an advantage at this quantum of debt. In this case, however, the underwriters were able to drive spreads down by marketing the issuance to a wider investor base and having the bonds certified as ‘green’ in an increasingly ESG-focused market. The bonds ultimately cleared the market at highly attractive pricing, providing excellent value-for-money to the Authority.

EllisDon Capital, acting as the consortium’s Financial Advisor, structured an innovative and efficient financing solution that exceeded the client’s expectations and provided exceptional value for Interior Health.

• This project is one of only a few projects in Canada to have Green Bond certification, which made it a unique and attractive offering for an increasingly ESG-focused investor base, ultimately attracting interest from a major overseas investor.
• EllisDon Capital provided a highly efficient financing solution for the project by using monthly bond payment frequency, tight debt service coverage ratios, multiple tenors of long-term debt, and an A3 credit rating from Moody’s.
• Additionally, EllisDon Capital provided further efficiencies by using a security package centered around a Performance Plus Bond in lieu of a traditional letter of credit, and this was viewed favorably by the rating agency and investors.

The partnership between EllisDon Infrastructure Healthcare (EDIH) and the client, Interior Health, achieved value for taxpayers’ dollars of $63.59 million using Partnerships BC’s PPP Model compared to a traditional Design-Build option. EDIH was chosen as the PPP partner for the RIH PCT Project as they offered innovative financing, which was structured by EllisDon Capital, and numerous improvements over the indicative design, and cost and schedule certainty.