The company building the Hurontario LRT, also known as the Hazel McCallion line, appears to have hit major financial hurdles leading to new warnings that the project is at risk of a credit downgrade if it can’t meet upcoming construction targets.
Mobilinx Hurontario — the construction consortium building the 18-km line — was awarded a $4.6 billion contract in 2019 to design, build, finance and operate the line for 30 years.
While the line was initially promised to be delivered in “Fall 2024,” according to Infrastructure Ontario, the LRT no longer has an official opening date as a result of what appears to be construction and financing issues related to the project.
Mobilinx has faced legal challenges in both Toronto and Brampton over the alleged failure to return equipment, pay rental fees and square up a $2.7-million bill with another subcontractor.
Meanwhile, a new report from S&P Global Ratings pointed to “newly reported delays” in construction that could jeopardize Mobilinx’s ability to pay off its creditors — forcing provincial transit agency Metrolinx to consider a “global settlement.”
“We are aware of the recent S&P Report and are in regular communication with Mobilinx on the project,” a spokesperson for Metrolinx said in a statement.
“When construction nears completion and we move into the testing and commissioning phase, we will be in a better position to provide a specific opening date.”
Mobilinx did not respond to a request for comment from Global News in time for publication.
Progress made and challenges faced
Despite construction delays through the pandemic, Metrolinx said Mobilinx and its contractors have made “significant progress” in completing the 19-stop Hurontario LRT, which is set to run the length of Mississauga.
Mobilinx installed two push boxes — a large, concrete box used to create tunnels under existing rail and road infrastructure — at the Port Credit GO station and under the Queen Elizabeth Way, while construction of the elevation portion of the LRT, over Highway 403, is also underway.
“Track work has finished at 30 of 55 intersections along the corridor, with six out of 18 stops having now been constructed,” Metrolinx told Global News. “Preparations are also underway for the delivery of the Light Rail Vehicles at our Operations, Maintenance and Storage Facility.”
At the same time Metrolinx says tangible progress is being made on the route, a newly-published credit agency report shows a growing number of issues are plaguing the line, including on an already-installed portion of the track.
“The main reasons for the newly reported delays are special track procurement and track tolerance issues in certain areas of the project’s alignment,” said S&P Global Ratings in an Oct. 2 report.
In some cases, S&P said, Mobilinx discovered track tolerance issues on portions of the LRT that have already been installed but are now “out of compliance with specifications.”
In another instance, in order to accommodate the LRT wheels, Mobilinx had to “make specific design changes” which meant the consortium was forced to “reprocure special tracks” for the project.
“The project believes the root cause has been addressed and is determining a path forward,” S&P said.
The delays, however, also appear to have created a financing problem for the consortium, largely because its timeline for completion is now an open question.
“Since the project is incurring concurrent delays on multiple other fronts, the implications and treatments of such delays are still under discussion,” S&P said.
In 2019, with the construction contract in hand, Mobilinx went to private lenders to secure hundreds of millions in loans, including: $262 million in secured bonds and $487 million in credit facility.
S&P Global Ratings now warns that Mobilinx is at risk of a credit rating downgrade because its “cushion” to repay lenders is quickly running out.
“The CreditWatch placement reflects that we could lower the rating if Mobilinx reports further delays such that we view the senior lenders’ long-stop date is at risk or if it does not receive interim schedule relief and an extension to the longstop date in the next few months,” S&P said.
The credit problems are a concern for one local Mississauga councillor, representing a city that has long advocated to have its own rapid transit route.
“It’s certainly not something you want to see,” Coun. Joe Horneck told Global News. “It’s certainly not a welcome headline and I hope it won’t delay implementation.”
Legal battles with subcontractors
As construction of the Hurontario LRT progressed, the builders also found themselves in court thrashing out multiple financial disputes with subcontractors.
In late 2023, Barricade Traffic & Services filed a lawsuit in Toronto claiming it was owed more than $300,000 for rental equipment that was “not returned or made available for pickup” by Mobilinx.
The company claims that the consortium refused to return traffic control equipment once the retail period had ended and continued to use the equipment “without payment.”
“The plaintiff states that Mobilinx’s refusal to return the outstanding traffic control equipment has, and continues to cause ongoing damage to the plaintiff in terms of lost opportunities in the marketplace,” the company stated in its claim.
Neither Barricade Traffic nor Mobilinx returned requests for comment.
In another lawsuit, filed in Brampton last year, Vaughan Paving claimed it was contracted by Mobilinx to pour concrete for inlaid rail along the LRT.
“The plaintiff delivered the materials and services requested with the sum of $2,749,126,84, including H.S.T., remaining unpaid and owing.”
It’s unclear whether the cases have been resolved.
Future questions
While Metrolinx has not publicly drawn attention to the construction or financing issues facing the Hurontario LRT, the latest issues mean it is now the third light rail project under construction in Ontario facing potential serious completion problems.
The years-delayed Eglinton Crosstown LRT and Finch West LRT, both in Toronto, have been mired in delays, leading to lawsuits between the construction consortiums and Metrolinx and erasing any certainty over when the lines will be in service for transit riders.
“We have obviously read in the media the challenges with the Crosstown LRT in Toronto and other LRT projects,” Horneck said. “I hope that that’s not what we’re talking about here.”
In each instance, Metrolinx has been able to withhold hundreds of millions of dollars in final payments from the consortiums — the only leverage the provincial transit agency routinely exerts over large construction firms.
While it’s unclear how much of the $4.6 billion Metrolinx has been able to withhold from Mobilinx, the two entities are now attempting to work out a financial deal that will allow the consortium to pay off its debts.
“We understand that the project is aiming to resolve the pending claims through a global settlement with (contracting authority, Metrolinx),” the S&P report states.
“Although the timeline on the final resolution remains unknown, whether the project can achieve intermediate progress with interim schedule relief in the next few months will be critical to the project’s rating,” S&P added.
Also unknown are the future expansion plans for the Hurontario LRT in Mississauga and Brampton that were abruptly by Premier Doug Ford in late January.
The changes were to take the line north into Brampton and to revive a loop around downtown Mississauga axed during the Ford government’s first term.
“I’m going to spend a couple of billion dollars more to make sure that we do the loop,” Ford said at the time.
Horneck said the city was expecting an update from Metrolinx this fall, but has yet to receive concrete information on the extensions.
“We’re still waiting for what the numbers are going to be like, what the dates of delivery would be like to extend the line we’re already constructing,” Horneck said.
Metrolinx said the province has designated the expansion as a priority transit project and is currently working on planning and funding work but it has not committed to expanding the scope of the Mobilinx contract.
“A construction team will be determined through the planning and procurement process,” Metrolinx said in a statement.
Neither the completion date for the expansion nor its cost have been made public by the Ford government.