Approximately BRL125 million of debt instruments affected
Sao Paulo, November 26, 2010 -- Moody's America Latina assigned issuer ratings of Baa2 on the global scale
and Aaa.br on the Brazilian National scale to Concessionaria do
Sistema Anhanguera-Bandeirantes S.A. (AutoBAn).
At the same time, Moody's assigned a Baa2 and Aaa.br to AutoBAn's
proposed issuance of 395-day BRL 75 million senior unsecured debentures
and a BR-1 rating to the 360-day BRL 50 million unsecured
promissory notes. The outlook is stable for all ratings.
This is the first time Moody's has assigned a rating to AutoBAn.
..Issuer: Conc. do Sistema Anhanguera-Bandeirantes
....Issuer Rating: Baa2 (global scale)
/ Aaa.br (Brazilian national scale)
....BRL75 million senior unsecured debentures:
Baa2 / Aaa.br
....BRL50 million promissory notes:
The Baa2 issuer rating reflects the strong asset features of the AutoBAn
road system, with a favorable alignment for connecting the metropolitan
areas of Sao Paulo, Jundiai, Campinas and Limeira, some
of the most well-developed and economically diversified regions
of the country.
"The rating also considers the mature nature of the concession,
as evidenced by a solid track record of toll traffic that dates back to
1998; this record leads to predictable cash flows and very strong
credit metrics for the rating category," said Moody's
analyst Cristiane Spercel. "The relatively stable regulatory
environment for operating toll roads in the State of Sao Paulo further
supports the rating."
The risks associated with the limited structural provisions embedded in
the proposed debt issues along with the high level of investment activity
of its controlling shareholder constrain the rating, as does the
risk of additional investments in the concession that could lead to further
borrowings taking place when capital markets are not necessarily favorable.
Moody's notes that AutoBAn's other existing debt agreements
contain cross default provisions with Companhia de Concessoes Rodoviárias
(CCR), its parent company. In the event that CCR goes bankrupt
or files for reorganization under the Brazilian bankruptcy law,
the AutoBAn debenture holders could call an early maturity event and execute
their rights derived from the debentures' guarantees. As a result,
AutoBAn's issuer rating also incorporates the risk profile of CCR
on a consolidated basis.
The CCR group has a strong track record of sizeable investments that include
participating in auctions for new concessions and acquiring operating
companies, as illustrated by the recent acquisition of Rodovias
Integradas do Oeste S/A, a 516- kilometer concession in the
state of Sao Paulo for approximately BRL1.3 billion. The
group's core business is the operation of 2,093 km of toll
roads in Brazil under long-term concession agreements granted by
the federal and the state governments in Sao Paulo, Rio de Janeiro
and Parana, which accounts for over 90% of the group's
revenues and cash flows. Nevertheless, over the past few
years the group has been diversifying its portfolio of concessions by
participating in the Line 4 of the São Paulo subway system,
the concession for vehicle emissions inspection in city of Sao Paulo though
Controlar, and the management of electronic toll payments through
Notwithstanding its strategy to pursue opportunistic investments in the
transportation industry, CCR has historically demonstrated that
it is a prudent investor that engages in new ventures only with reasonable
rates of return. On a consolidated basis, additional leverage
is largely limited by financial covenants that restrict Net Debt to Ebitda
ratio higher than 3.0 times and Ebitda to net interest expenses
lower than 2.0 times.
CCR's access to the local banking and capital markets has been resilient,
supported by its experienced management team and relatively higher corporate
governance standards compared to local peers. Financing for CCR's
various concessions has been mostly in the form of long-term project
finance debt with the Banco Nacional de Desenvolvimento Economico e Social
(BNDES) and the Inter-American Development Bank (IDB), complemented
with debentures and equity offering in the capital markets. Thus,
Moody's views the risk of any major cash draining of AutoBAn in order
to fund new CCR group projects as relatively low in the near term.
The proposed debt issuances of AutoBAn in the total amount of BRL125 million
will be used to complement the funding for its capital expenditures and
working capital needs in the near term. The concessionaire is in
the final stages of a significant investment cycle of approximately BRL530
million, primarily to improve the Anhanguera road and to reduce
traffic congestion in the metropolitan area of Sao Paulo. These
investments triggered a review of the concession agreement to restore
the economic equilibrium of the concession through the extension of the
concession tenor and partial retention of concession liability payments.
Although there are limited structural provisions embedded in the proposed
debt issuances, AutoBAn's other debt agreements outstanding
until 2014 comprise adequate protection clauses for the bondholders.
Those provisions limit additional debt issuances only to the financing
of capital expenditures in the concession or to support working capital
needs up to BRL50 million. Additionally, there are financial
covenants that largely restrict the distribution of dividends while Net
Debt to EBITDA is above 2.5 times and Debt Service Coverage Ratio
is lower than 1.3 times. Moreover, the concession
agreement requires the company to maintain a minimum equity capital of
10% the amount of accumulated investments in the concession projected
for the next 12 months.
Going forward, AutoBAn is committed to BRL1.2 billion in
investments over the remaining 15 years of the concession, of which
approximately BRL490 million will be disbursed over the next few years
for the construction of 126 kilometers additional lanes by April 2014.
These investments are consistent with the current concession agreement,
which will not be subject to review for additional compensation.
In the medium term, the concessionaire could also invest BRL360
million for the construction of an extension of the Anhanguera road to
the CEAGESP, the largest agricultural distribution center in the
metropolitan area of Sao Paulo, and another BRL180 million in a
new road section between the city of Vinhedo and the Viracopos Airport
in the metropolitan area of Campinas; however, these investments
are still under negotiation with the regulator. The ultimate magnitude
and timing of these potential capital investments could exert pressure
on AutoBAn's financial performance.
ARTESP, the concession authority of Sao Paulo since 2002,
is generally supportive of toll road operators, as the recent amendments
in the concession agreement with AutoBAn demonstrate. Although
not completely independent of political influence, from a credit
perspective, the regulatory framework of Sao Paulo can be considered
above the Brazilian average in terms of the transparency of its tariff
setting mechanisms and the protection against events outside the control
of the concessionaire. The concession agreement provides for annual
tariff increases in line with inflation as measured by the general price
AutoBAn has demonstrated a strong track record of tolled traffic.
From 1999 through 2009, AutoBAn's toll traffic presented an
average growth rate of 6.4% per year, which compares
favorably with the Brazil's average GDP growth of 3.3% per
year during the same period. The traffic volumes at AutoBAn were
virtually flat in 2009 as a result of the tighter economic conditions
that led to no growth in the Brazilian GDP in 2009; however,
in the first nine months of 2010 traffic volumes grew 14.4%
compared with the same period in 2009 indicating a strong recovery.
The solid traffic volumes and the stable regulatory environment in the
state of Sao Paulo support AutoBAn's strong credit metrics for its
rating category. The Funds From Operations (FFO) to Debt has been
around 24% over the past three years and its cash interest coverage
ratio has been in the 5.5x- 6.0x range. Those
indicators map high for the Baa category in Moody's rating methodology
for operational toll roads. While AutoBAn engaged in significant
capital expenditures over the last three years, the overall leverage
has been virtually unchanged and the Debt to EBITDA ratio has been 2.7x
on average from 2008 through September 2010. These strong indicators
are partially offset by a low retained cash from operations driven by
high dividend distribution. This practice is generally in line
with other mature toll road concessions.
Moody's adjusts AutoBAn's debt to include about the off-balance-sheet
concession liabilities of approximately BRL1.5 billion and refinanced
taxes of approximately BRL390 million generated through the company's
adherence to the Federal Program of Fiscal Recovery (REFIS).
The stable outlook reflects Moody's opinion that AutoBAn's operational
performance will continue to be strong during the remaining life of the
concession in light of solid credit fundamentals boosted by the expected
growth in the Brazilian GDP. Moody's expects that the payment of
dividends and additional leverage are likely to continue over the next
years but Moody's expects them to be prudently managed so that credit
metrics remain within the current rating category.
The rating or the outlook could be upgraded if the company were to steadily
improve its liquidity profile and produce credit metrics in line with
or exceeding historical performance so that the FFO to debt ratio remains
above 30% and interest coverage stays above 5.5 times on
a sustainable basis.
The rating or the outlook could be downgraded if there is a significant
and sustained deterioration in credit metrics so that FFO to debt ratio
falls below 20% and interest coverage ratio is below 4.0x
for an extended period of time. Deterioration in the credit quality
of CCR could also exert downward rating pressures
Moody's National Scale 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 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 ".br"
for Brazil. For further information on Moody's approach to national
scale ratings, please refer to Moody's Rating Implementation Guidance
published in August 2010 entitled "Mapping Moody's National Scale
Ratings to Global Scale Ratings"
The principal methodology used in rating AutoBAn was Operational Toll
Roads rating methodology published in December 2006. Other methodologies
and factors that may have been considered in the process of rating this
issuer can also be found on Moody's website.
AutoBAn is an operating subsidiary of Companhia de Concessoes Rodoviarias
(CCR, unrated), one of Brazil's largest toll-road concession
groups, which controls approximately 2,093 kilometers of toll
road concessions. CCR is controlled by a consortium of AGConcessoes,
Camargo Correa and Soares Penido Concessoes. In the last 12 months
ended Septermber 30, 2010, CCR attained consolidated revenues
of BRL3.6 billion (USD2.0 billion) and an EBITDA of BRL
2.5 billion (USD1.4 billion), AutoBan accounted for
35% of the revenues and 39% of the EBITDA.
AutoBAn holds a 28-year concession to operate the toll road services
of the Anhanguera- Bandeirantes road system, a 317-kilometer
concession in the State of Sao Paulo, which the state regulatory
agency, Agência Reguladora de Serviços Públicos
Delegados de Transporte (ARTESP), granted in May 1998. In
the last 12 months ended September 30, 2010, the company reported
an annual tolled traffic of 232.5 million of equivalent vehicles.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,public
information, confidential and proprietary Moody's Investors
Service's information, confidential and proprietary Moody's
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on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
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Infrastructure Finance Group
Moody's America Latina Ltda.
Chee Mee Hu
MD - Project Finance
Infrastructure Finance Group
Moody's Investors Service
Moody's America Latina Ltda.
Moody's assigns Aaa.br issuer rating to AutoBAn; outlook stable
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