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Rating Action:

Moody's Affirms ENA Norte Trust's Rating; Changes Outlook To Negative

22 May 2020

New York, May 22, 2020 -- Moody's Investors Service, ("Moody's") affirmed the Baa3 rating of ENA Norte Trust's (ENA Norte) Senior Unsecured Notes due 2028. Moody's also changed the outlook to negative from stable.

The rating action was triggered by the unprecedented traffic declines resulting from the restrictive measures and travel bans imposed to contain the coronavirus (COVID-19) outbreak.

Affirmations:

..Issuer: ENA Norte Trust

....Senior Unsecured Regular Bond/Debenture, Affirmed Baa3

Outlook Actions:

..Issuer: ENA Norte Trust

....Outlook, Changed To Negative From Stable

RATINGS RATIONALE

The rating action reflects the expected deterioration of ENA Norte's liquidity position and financial performance that will be driven by weaker projected traffic performance amid the COVID-19 outbreak.

The rapid and broad spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The toll-road sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment. More specifically, ENA Norte is exposed to shifts in market sentiment in these unprecedented operating conditions and remains vulnerable to the outbreak continuing to spread. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. Today's action reflects the impact on ENA Norte of the breadth and severity of the shock.

The coronavirus outbreak is leading to a period of sharp drop in traffic that is expected to remain in next months. From January to April, traffic has declined 25% on an accumulated basis with respect to 2019. We expect that the poor traffic performance will remain over the following months with a gradual recover towards the end of the year, but not fully. Traffic and revenues are expected to decline close to 30% in 2020 against 2019 which may lead to operating cash shortfalls and the need to draw from the 6-month Debt Service Reserve Fund (DSRF). Notwithstanding, we expect that the shortfall will be in the range of $1.1 million or 14% of the $8.4 million DSRF, and that it will be replenished within 2020. We recognize that more challenging downside scenarios could materialize.

Moody's recognizes that the weak performance is partially compensated by ENA Norte's project finance provisions in the structure, including a cash sweep mechanism, distribution and additional indebtedness tests, among others. Nevertheless, the liquidity is considered relatively weak for these types of structures. The low liquidity is compensated by the debt structure, which only makes mandatory interest payments and principal is repaid on a cash sweep basis.

This rating incorporates our approach of ENA Norte as a government related issuer (GRI), given ENA's status as a wholly-owned entity of the Republic of Panama. The GRI analysis begins with a Baseline Credit Assessment (BCA), which is then adjusted for the expected levels of dependence on and support expected from the federal government. The BCA for this entity was determined to be ba1. The level of dependence was designated as very high because of the strong correlation between the financial and operational ties between the road and the government of the Republic of Panama. The two are closely linked and revenue for both are derived from the same population base and face very similar credit risks. The level of expected support was designated as moderate because of the close links between the government and ENA Norte, the importance of the road to the national transport system and the implicit government support demonstrated for the road through this transaction. As a result of this GRI analysis, the BCA received a one-notch rating uplift to produce a final rating outcome of Baa3.

RATING OUTLOOK

The negative outlook reflects the downside risks stemming from the impact on the coronavirus on traffic and cash generation capacity which could lead to weaker liquidity.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING

In light of the negative outlook, upward rating pressure on ENA Norte's ratings is unlikely in the near future.

The rating could be downgraded if the coronavirus outbreak has a longer and continued impact on traffic that leads to a material reduction of available liquidity and sustained financial deterioration.

ABOUT ENA NORTE

ENA Norte Trust is the special purpose vehicle created for this transaction to which rights under a concession and cash flows related to Corredor Norte toll road have been assigned. Corredor Norte is a highway system in Panama City, the capital of the Republic of Panama. It spans the northern part of the city complementing the Corredor Sur highway that runs along the shore in the south. Corredor Norte currently consists of three 2-lane segments totaling 33 kilometers, and one additional segment (Phase IIB), which is not a part of this transaction.

The methodologies used in this rating were Publicly Managed Toll Roads and Parking Facilities published in March 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1091602, and Government-Related Issuers Methodology published in February 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186207. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

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_1133569.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

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.

Adrian Garza
Vice President - Senior Analyst
Corporate Finance Group
Moody's de Mexico S.A. de C.V
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No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
JOURNALISTS: 1 888 779 5833
Client Service: 1 212 553 1653

Alejandro Olivo
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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