Approximately BRL386.70 million of debt securities affected
Sao Paulo, February 05, 2016 -- Moody's América Latina (Moody's) has affirmed the ratings of the
BRL386.70 million senior secured debentures issued by Linha Amarela
S.A. -- LAMSA at Ba2 on the global scale and
Aa3.br on the Brazilian National Scale ("NSR"). At the same
time, Moody's changed the outlook to stable from positive.
RATINGS RATIONALE
The affirmation of the ratings reflects primarily: (i) Moody's
view that LAMSA, as a mature concession, will continue to
present strong and stable operating cash flows, supported by the
company's robust asset features and traffic profile; (ii) strong
credit metrics for the rating category given the strong economic fundamentals
of the concession; (iii) the long remaining concession life;
(iv) relatively healthy liquidity profile given the continuing access
to funding; and (v) the continuing positive track record of payments
by Concessão Metroviária do Rio De Janeiro S.A.
-- METRORIO (Ba2/Aa2.br; stable), the
concessionaire of the subway system in the city of Rio de Janeiro (Baa3
on review for downgrade), on the intercompany loan provided by LAMSA.
The indicated rating provided by Moody´s Privately Managed Toll
Roads Methodology maps to an A3 global scale rating, considering
historical credit metrics, and Baa1 on a 12-18 month forward
looking basis. LAMSA´s Aa3.br national scale rating
reflects the standing of the company relative to its domestic peers.
Moody's decision to change the outlook to stable is supported by
Brazil's deteriorating macroeconomic environment that could materially
affect the positive financial trends registered so far, notwithstanding
LAMSA's robust asset features and traffic profile, which have
historically resulted in resilient operating cash flows. In such
context, the ratings are somewhat constrained by: (i) the
potential political interference that could negatively impact tariff adjustments
granted by the City of Rio de Janeiro; (ii) the credit risk related
to the intercompany loan that has been extended to METRORIO; (iii)
the track record of relatively high dividend payments; (iv) the financial
covenants embedded in the rated debentures.
LAMSA´s amortizing debentures, which were issued in one single
tranche on 31 May 2012, have a 15-year tenor including a
3-year grace period, The debentures were placed with the
Carteira Administrada de Transporte Urbano (the Urban Transportation Fund),
which is managed by the Caixa Economica Federal, a bank controlled
by the Brazilian Federal Government (Baa3 on review for downgrade).
The largest portion of the debentures' proceeds (up to BRL 232.6
million) were used to finance LAMSA´s CAPEX program, and the
payment, in full, of the outstanding debt of BRL180 million,
which was previously raised to finance CAPEX investments. The remaining
portion (BRL154.2 million) was used to partially finance the CAPEX
program of its sister company, METRORIO, which is also controlled
by INVEPAR. METRORIO borrowed this amount from LAMSA by issuing
senior unsecured debentures, which were fully underwritten by LAMSA.
LAMSA´s debentures are secured by a pledge of 40% of its
present and future toll receivables. In addition, METRORIO
provided a corporate guarantee to Caixa Economica Federal (CEF) to back
LAMSA's repayment obligation in the amount owed by METRORIO to LAMSA (BRL154.2
million). Also, METRORIO will subrogate to the rights of
LAMSA's debenture holders in case METRORIO's guarantee is called by CEF.
LAMSA´s debentures require that it comply with a 1.3x minimum
debt service coverage ratio (DSCR) covenant, and maintain an EBITDA
/ Net Financial Expenses ratio equal to or higher than 1.5x,
and Net Debt / EBITDA (Net Debt excludes cash and liquid investments)
equal to or lower than 2.0x. Dividend distributions above
the minimum threshold required by Brazilian Corporate Law are subject
to the compliance by LAMSA with the debentures´ covenants,
which include meeting a DSCR equal or higher than 1.3x.
As of 30 September 2015, LAMSA was in compliance with the debentures'
financial covenants, and we project that the company will continue
to comply with the covenants in our five-year projections,
adjusting dividend payments accordingly, if needed, to comply
with said financial covenants.
INVEPAR has in the past extended intercompany loans to provide liquidity
to its subsidiaries with the objective of reducing the average cost of
debt on a consolidated basis. Despite LAMSA´s loan to METRORIO,
INVEPAR´s risk management policy, which was implemented in
2013, restricts future intercompany loans among its subsidiaries.
Therefore, LAMSA cannot provide or receive financing, except
when it is the recipient of funds from the parent, INVEPAR.
The debentures also restrict LAMSA and METRORIO from providing fiduciary
guarantees, individually or in the aggregate, above BRL1 million.
WHAT COULD CHANGE THE RATING UP / DOWN
An upgrade of the ratings will depend mainly on the satisfactory financial
and operational performance of METRORIO, including the timely scheduled
principal and interest payments of LAMSA's intercompany loan to
METRORIO. A sustainable improvement of the macroeconomic environment
in Brazil could also justify an upgrade in the outlook.
Conversely, the ratings could be downgraded if: (i) LAMSA's
liquidity deteriorates; (ii) METRORIO's credit metrics weaken and/or
METRORIO does not make scheduled principal and interest payments;
(iii) the ultimate shareholders decide to leverage LAMSA in order to invest
in new projects; and (iv) LAMSA's does not comply with the
financial covenants of the rated debentures. A rating downgrade
could also be triggered if there is a perceived deterioration in the level
of supportiveness of the concession and regulatory framework to private
concessionaires as well as a weaker perceived level of support from LAMSA's
ultimate shareholders. Quantitatively, a downgrade is highly
unlikely given the company's strong credit metrics for the rating category.
The further deterioration of the domestic macroeconomic environment could
also trigger a change in the outlook.
Linha Amarela S.A. -- LAMSA has the concession
to operate the toll road services of a 20-km urban route in the
city of Rio de Janeiro. The concession was granted by the City
Government of Rio de Janeiro in 1998 for a 25-year period.
In May 2010, LAMSA committed to additional investments, which
resulted in the concession being extended for an additional 15 years,
until December 2037. At the end of the concession period,
the assets will revert to the City of Rio de Janeiro.
LAMSA is wholly owned by Investimentos e Participações em
Infraestrutura S.A. -- INVEPAR (Ba3/A2.br;
stable), holding company controlled by the three largest Brazilian
pension funds (PREVI, FUNCEF and PETROS) and the engineering and
construction group OAS (not rated). INVEPAR was established in
March 2000 to invest in companies operating in the transport infrastructure
sector.
The principal methodology used in these ratings was Privately Managed
Toll Roads published in May 2014. Please see the Ratings Methodologies
page on www.moodys.com.br for a copy of this methodology.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn"
country modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in June 2014 entitled "Mapping Moody's National
Scale Ratings to Global Scale Ratings".
REGULATORY DISCLOSURES
Information sources used to prepare the rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's information.
Moody's considers the quality of information available on the rated entity,
obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a rating is of sufficient quality and from sources Moody's
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and cannot in every instance independently verify or validate information
received in the rating process.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Please see the ratings disclosure page on www.moodys.com.br
for general disclosure on potential conflicts of interests.
Moody's America Latina Ltda. may have provided Other Permissible
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12 months preceding the credit rating action. Please see the special
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The date of the last Credit Rating Action was 01/09/2014.
Moody's ratings are constantly monitored, unless designated as point-in-time
ratings in the initial press release. All Moody's ratings are reviewed
at least once during every 12-month period.
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
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this announcement provides certain regulatory disclosures in relation
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ratings, this announcement provides certain regulatory disclosures
in relation to the provisional rating assigned, and in relation
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of the debt, in each case where the transaction structure and terms
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please see the ratings tab on the issuer/entity page for the respective
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and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
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Alexandre De Almeida Leite
VP - Senior Credit Officer
Infrastructure Finance Group
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
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William L. Hess
MD - Utilities
Infrastructure Finance Group
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Moody´s affirms the ratings of LAMSA´s senior secured debentures at Ba2/Aa3.br; changes outlook to stable
