Sydney, May 07, 2013 -- Moody's Investors Service has today affirmed the senior secured A3 long
term rating of Airport Motorway Trust (AMT), as well as the stable
outlook. AMT is the financing vehicle for the Airport Motorway
Group (AMG) which holds the concession to operate the Eastern Distributor
(ED), a six kilometre toll road in inner-Sydney. At
the same time, Moody's has affirmed the issuer's senior secured
A3 rating.
RATINGS RATIONALE
"The A3 rating reflects the strengths of AMG's business profile which
includes its essential nature in the road network, mature traffic
profile and supportive features in the concession agreement", says
Arnon Musiker, a Moody's Vice President & Senior Analyst.
"These include AMG's entitlement to increase the toll tariff by
a minimum of 1% per quarter over the concession term, and
compensation for any future competing roads".
At the same time, the A3 rating considers the high leverage resulting
from the maturity of an infrastructure bond structure during 2012 -
which previously contributed a material portion of AMG's funds from operations
- as well as softening in traffic volume growth observed in recent
months.
The rating is based on growth in traffic volumes reverting to Moody's
base case expectation of around 1% per annum after recent weakness.
"We believe that the decline in traffic volumes in the nine month period
ended March 2013 resulted from temporary factors, including motorist
diversion after a toll tariff increase in July 2012. That said,
a driver of AMT's rating will be the extent to which traffic volumes
resume increasing at our base case expectation over the next 1 to 2 years
- continued underperformance will reduce the cushion within the
A3 rating," adds Musiker.
Over the next 1-2 years, Moody's expects AMG's ratio of FFO/Debt
to increase to around 10% to 11%, compared to the
rating tolerance of 10%.
"The stable outlook is underpinned by our view that toll tariff increases
over the next 2 to 3 years should strengthen credit metrics above the
tolerance level for the rating", says Musiker.
AMT's rating could be challenged if financial metrics remain weak at the
rating level after factoring in toll tariff increases, including
FFO/Interest below 2.5x and FFO/Debt below 10% on a consistent
basis. This would most likely result from underperformance in traffic
volume growth.
Whilst we consider upward rating movement as unlikely given the mature
traffic profile, AMT's rating could be upgraded if FFO/Interest
increases above 3x to 3.5x and FFO/Debt increases above 15 -
20% on a sustained basis.
The principal methodology used in this rating was Operational Toll Roads
published in December 2006. Please see the Credit Policy page on
www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt 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 rating action on the support provider and in relation to each particular
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 rating action, and
whose ratings may change as a result of this 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.
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.
Arnon Musiker
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Pty. Ltd.
Level 10
1 O'Connell Street
Sydney NSW 2000
Australia
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100
Terry Fanous
Associate Managing Director
Corporate Finance Group
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100
Releasing Office:
Moody's Investors Service Pty. Ltd.
Level 10
1 O'Connell Street
Sydney NSW 2000
Australia
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100
Moody's affirms Airport Motorway Trust's A3 rating and stable outlook