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Rating Action:

Moody's Publishes Baa3 Underlying Rating of Sociedad Concesionaria Autopista Vespucio Sur, S.A.

15 Jul 2008
Moody's Publishes Baa3 Underlying Rating of Sociedad Concesionaria Autopista Vespucio Sur, S.A.

Approximately Unidades de Fomento 5.2 million outstanding

New York, July 15, 2008 -- On December 15, 2004 Moody's assigned a Aaa (global scale) rating to the senior secured bonds of Sociedad Concesionaria Autopista Vespucio Sur, S.A. based on the claims paying financial strength of XL Capital Assurance Inc. On June 20, 2008 Moody's downgraded the insurance financial strength ratings of XL Capital Assurance to B2. Moody's ratings on securities that are guaranteed or "wrapped" by a financial guarantor are generally maintained at a level equal to the higher of a) the rating of the guarantor or b) the published underlying rating. Accordingly the company has requested that Moody's publish the underlying rating of the senior secured debt of the Vespucio Sur toll road project. The company currently has UF 5,222,910 bonds outstanding and UF 3,736,320 in loans from the Instituto de Credito Oficial (a Spanish development bank rated Aaa); both debt issues are denominated in inflation-indexed Unidades de Fomento and are pari-passu.

Autopista Vespucio Sur is a 23 kilometer completely free-flow, electronic toll road serving metropolitan Santiago, Chile. The Baa3 underlying rating reflects the following credit considerations.

The alignment is important to the greater Santiago transportation network. Vespucio Sur is one of the 4 urban entirely electronic toll roads serving metropolitan Santiago. It is the southern portion of a ring road that encircles central Santiago. Granted as a concession by the Chilean Ministry of Public Works in 2001 with a current maximum term to 2040, the project enjoys the same stable, supportive regulatory environment as Costanera Norte, Vespucio Norte, and other toll road concessions in Chile.

The project was constructed on time and opened for traffic on December 1, 2005, slightly ahead of schedule. A unique feature of Vespucio Sur is the inclusion of a median facility designed to serve as the alignment of the Santiago Metro (lines 4 and 4A). The Ministry of Public Works (MOP) included the construction of the foundation for the Metro line simultaneously with the construction of the expressway in the Vespucio Sur concession agreement in exchange for capital payments from the MOP. The location of the Metro in the Vespucio Sur median raises the political visibility of the road and ties it into the overall urban transport network. Another key feature of the project was the requirement to build two local free lanes in each direction flanking the tolled express lanes -- three in each direction. Vespucio Sur incorporates a high speed tolled facility, a lower speed free road intended for buses and other traffic with at-grade intersections and lights, and a Metro line in the median. The project also includes 29 pedestrian overpasses/walkways, and various "green" areas per the Concession Agreement.

In 2006 the project's financial performance was below the 2004 traffic consultant's projections by an average 15%. However the 2007 Debt Service Coverage Ratio (DSCR) was 1.6 times as projected. According to the company's latest projections, 2008 DSCR will reach 1.6 compared to the 2004 projection of 1.8 times. Over the next ten year period, the company projects an average DSCR of 1.8. While this is approximately 20% lower than the 2004 traffic consultant's projections, it is still consistent with other toll roads in the Baa3 rating category.

The fundamentals of Vespucio Sur support the toll road's long term viability. According to the 2004 independent traffic consultant's report, over 90% of traffic consists of passenger cars and about 35% of the toll road clients are very frequent users. Vespucio Sur's central location, connectivity with other key urban expressways constituting important linkages throughout metropolitan Santiago, and the seamless interoperability with other toll roads in terms of the free-flow electronic tolling are supportive credit factors. Compared to the other metropolitan Santiago toll roads, the socio economics of the vespucio Sur alignment are more mixed and weighted more in the low to middle end of the spectrum. Trip purposes are expected to be varied and the majority of trips are expected to be of short to medium distance; less than 5% of users are expected to be full length trips. While these considerations present some moderate vulnerabilities, it should be noted that there are limited comparable alternative routes and the road is an integral part of a partial ring road that serves many different types of trips and trip lengths.

The financial structure provides standard bondholder protections. The final maturity of the debt is 24 years -- significantly shorter than the concession term of 2040. Upon final maturity of the debt, the project will have a comfortable 12 year "tail" until the final maturity of the concession. The Debt Service Reserve Fund is funded in an amount equal to the next 12 months of debt service payments. There is also a Major Maintenance Reserve and a Cash Collateral Account -- intended to trap cash when DSCR is less than 1.2 times up to an additional 1 years debt service; if DSCR is between 1.2 and 1.25 the Cash Collateral Account does not have to be funded but no equity distributions can be made. Equity distributions can only be made if DSCR is over 1.25 times. Based on the current financing model the projected average DSCR is over 2.5 times and the minimum expected DSCR is 1.6 times for the life of the debt.

The project sponsors are large construction/infrastructure companies with considerable global toll road experience. Concesionaria Autopista Vespucio Sur S.A. is comprised of Acciona S.A. and Sacyr Vellehermosa.

New York
Thomas J. Keller
Managing Director
Infrastructure Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Chee Mee Hu
Senior Vice President - Team Leader
Infrastructure Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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