New York, October 21, 2020 -- Moody's Investors Service, ("Moody's") affirmed
the A1 debt rating assigned to Panama Canal Authority ("ACP").
Moody's changed the rating outlook to negative from stable.
The change of outlook follows the outlook change on the rating of the
Government of Panama (Baa1 negative). For more information on the
Government of Panama, please visit https://www.moodys.com/credit-ratings/Panama-Government-of-credit-rating-591640/summary.
Affirmations:
..Issuer: Panama Canal Authority
....Senior Unsecured Regular Bond/Debenture,
Affirmed A1
Outlook Actions:
..Issuer: Panama Canal Authority
....Outlook, Changed To Negative From
Stable
RATINGS RATIONALE
The change in ACP's outlook to negative from stable reflects the
rating outlook change of the Government of Panama.
The credit quality of the Panama Canal Authority (ACP) reflects the distinctive
position of the Panama Canal as an infrastructure asset with a unique
geographic advantage and business model. Despite the coronavirus
pandemic and US-China trade tensions, the ACP's operational
and financial performance has been strong, supported by the recent
expansion and a new tariff scheme.
The coronavirus pandemic, the economic contraction and shifting
supply chains will hurt the canal's operations. We estimate tonnage
and transits will decrease by 3.0% and 8.0%,
respectively, during 2020 (under fiscal year analysis). We
expect a slow recovery in 2021, but performance will still be below
than 2019 levels.
The ACP's credit quality is also underpinned by the robust institutional
framework, corporate governance and international treaties that
ensure its operation without interference. The A1 rating is three
notches above the Government of Panama's (GOP) sovereign rating (Baa1
negative) and one notch above Panama's country ceiling of A2. The
rating reflects a long history of operations free of political interference;
its solid corporate governance; and rules that ensure the maintenance
of prudent business management. Notwithstanding, our negative
outlook reflects that ACP's creditworthiness cannot be completely
de-linked from the current stresses facing the government,
economy and population of Panama. As such, ACP's rating
is capped at one-notch above the sovereign ceiling.
RATING OUTLOOK
The outlook is negative in line with the rating outlook of the Government
of Panama.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
In light of the negative outlook, upward rating pressure on ACP's
ratings is unlikely in the near future. The rating outlook could
return to stable as a result from the stabilization of Panama's
rating outlook.
The rating could be downgraded if there is a downgrade of the sovereign
or if the country ceiling is lowered. The rating could face downward
pressure if weaker operational performance leads to a deterioration of
key financials, such that the ACP reports cash interest coverage
below 8.0x or funds from operations/debt below 30%.
Any changes to the ACP's legal status that affect its autonomy,
or any weakening of its corporate governance practices could also strain
the ratings.
The methodologies used in this rating were Privately Managed Port Companies
published in September 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1040210,
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.
ABOUT PANAMA CANAL AUTHORITY
The ACP is a legally autonomous entity of the Republic of Panama established
under Title XIV of the country's constitution. The ACP assumed
control of the Panama Canal on December 31, 1999, and is exclusively
responsible for the operation, administration, management,
preservation, maintenance and modernization of the canal,
as well as its activities and related services. The Political Constitution
of Panama also grants the ACP its own patrimony and right to manage the
canal, and establishes its status as a for-profit entity.
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.
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
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
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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.
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