A look at the credit ratings of several Canadian projects reveals how closely related they are with the credit ratings of the provinces that tender them. For almost all of these projects, Moody's finds that a downgrade of the grantor's rating would trigger a downgrade to the rating of an individual project.
Taking the Anthony Henday Drive Southeast Leg Ring Road PPP, in Edmonton, as an example, Moody's highlights "the very high credit quality of the counterparty" (in this case, Aaa-rated Alberta) as one of the key agents behind the project's A2 rating, a rating awarded to investments deemed of "low credit risk".
Moody's confidence in Alberta's credit worthiness is one of the factors that help offset what it calls "the weakening credit quality" of one of the private sector participants in the project, "the low level of debt service reserve fund equivalent to three months of debt service" and other factors weakening Government Moody's Longthe project's credit metrics.
That is to say, without the halo effect of the four provinces' rock solid credit ratings, lender appetite for many of these projects could be significantly lower than it is today. ■
| Government | Moody's Long-Term Debt Rating | S&P Long-Term Debt Rating |
| Government of Canada | Aaa | AAA |
| Alberta | Aaa | AAA |
| British Columbia | Aaa | AAA |
| Manitoba | Aa1 | AA |
| New Brunswick | Aa2 | AA- |
| Newfoundland | Aa2 | A |
| Nova Scotia | Aa2 | A+ |
| Ontario | Aa1 | AA- |
| Prince Edward Island | Aa2 | A |
| Québec | Aa2 | A+ |
| Saskatchewan | Aa1 | AA+ |
Source: Bloomberg