Sao Paulo, November 25, 2020 -- Moody's América Latina Ltda. ("Moody's")
assigned a Ba2 global scale rating and a Aa2.br national scale
rating to CCR S.A. (CCR)'s planned issuance of BRL960
million senior unsecured debentures (14th issuance), comprising
a BRL480 million tranche (1st series) with final maturity 2026 and a BRL480
million tranche (2nd series) with final maturity in 2028. CCR's
Ba2/Aa1.br corporate family ratings (CFR) are unaffected by this
rating action. The outlook remains stable.
RATINGS RATIONALE
The debenture's ratings incorporate our view of CCR's strong
credit quality resulting from a diversified portfolio of transportation
concessions, located in the country's most developed economic
regions. The ratings also consider the overall mature nature of
its concessions' agreements, with a solid operating track
record that supports relatively stable and predictable cash flows.
As a holding company, CCR largely depends on regular dividends up
streamed by its operating subsidiaries to meet its obligations,
equity investment commitments and potential cash requirements related
to its guarantees. Therefore, the debenture's ratings
on the national scale stand one notch lower than CCR corporate family
rating, reflecting Moody's view of structural subordination,
which is based on the relative indebtedness at the holding compared to
that of its operating companies and expected cash availability to service
the debt. The global scale rating is constrained by the sovereign
rating (Government of Brazil, Ba2 stable) given the company's regional
operational profile with regulated revenues that are highly correlated
to the country's GDP.
The proposed debentures will have cross default provisions with other
outstanding debt from the company among other acceleration clauses such
as change in control, bankruptcy and restriction on dividends distribution
above the minimum if consolidated financial Net debt to adjusted EBITDA
is higher than 4.5x, to be verified annually. Proceeds
from the 1st series of this issuance will be used to strengthen the company's
cash position ahead of refinancing needs in the first quarter of 2021.
The 2nd series will be issued in the form of infrastructure debentures
pursuant to law 12.431, with proceeds to be used for reimbursement
of development capital and expenses related to the project Sistema Metroviario
de Salvador e Lauro de Freitas, located in the metropolitan area
of the Municipality of Salvador, in the State of Bahia, through
the integration between the bus and subway networks, which consists
of two subway lines with an initial extension of 32 kilometers,
with the possibility of expanding 5 kilometers for Line 1 and 3 kilometers
for Line 2, according to the concession contract No. 01/2013
which is held by Companhia Metro da Bahia, a full subsidiary of
CCR.
The stable outlook takes into consideration the sharp traffic deterioration
observed in 2020 as a result of the coronavirus outbreak and economic
contraction, along with Moody's assumption that demand will
gradually recover in the next 12-18 months, supported by
the ease in social distancing measures and business closures. Other
factors related to the economic downturn that could also pressure traffic
performance include rising unemployment and the failure of government
measures to boost consumer confidence, or a significant second wave
of contagion leading to renewed social distancing measures. Nonetheless,
we consider CCR has flexibility to manage liquidity in the event of a
prolonged downturn. The stable outlook relates to Moody's expectation
that CCR's credit metrics will remain strong with adequate liquidity to
support investment requirements and debt service. The leniency
agreements performed by the company reduce but do not eliminate potential
future investigations that while unexpected, could have material
adverse consequences for the company's credit profile. Also,
the outlook does not incorporate any concession life reduction from the
ongoing regulatory disputes on contract amendments from 2006 for some
of its main concessionaires.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The debenture's national scale ratings could be upgraded if CCR
demonstrates sustained better-than-expected operational
performance, lower indebtedness at the holding level and higher
cash coverage. On the global scale, a positive rating action
depends on a similar action on Brazil's sovereign rating. A positive
rating action would also consider the concession and regulatory frameworks
in which CCR operates and the normal course of its businesses.
On the other hand, negative pressure on CCR's senior unsecured debt
ratings would increase with Moody's perception of reduced flexibility
in the holding's ability to regularly upstream cash from its operating
subsidiaries, as a result of traffic/passenger performance below
our expectations, higher leverage driven by new investments or lower
liquidity cushion combined with more restrictive access to the debt markets.
Negative rating action on the debentures could also result from a material
increase in the proportion of debt outstanding at the holding level combined
with sustained lower cash availability to service the its debt.
A deterioration in the sovereign's credit quality could also exert downward
pressure on CCR's ratings. Downward pressure could arise from a
significant and sustained downturn in the company's consolidated credit
metrics, such that:
» funds from operations/debt falls below 12% (15.8%
as of LTM September 2020)
» DSCR ratio stays below 1.3x (1.4x as of LTM September
2020) for an extended period
Headquartered in Sao Paulo, Brazil, CCR is the holding company
of one of Brazil's largest infrastructure concession groups managing and
operating a toll road network of 3,959 km through twelve different
concessionaires with maturities ranging from 2021 up to 2050. CCR
also participates in other urban mobility, airport concessions and
infrastructure services in the Americas. CCR is controlled by the
Andrade Group, Mover Group and Soares Penido Group Concessoes Group
with a combined participation of 44.8%; the remaining
55.2% of shares are free float. According to Moody's
standard adjustments, in the last twelve months ended September
2020 the company generated BRL9.0 billion in net revenues (excluding
construction revenues) and EBITDA of BRL5.3 billion, resulting
in Net Debt to EBITDA of 3.9x and FFO to Debt of 15.8%,
respectively.
The principal methodology used in these ratings was Privately Managed
Toll Roads published in October 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1096736.
Alternatively, please see the Rating 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 May 2016 entitled "Mapping National Scale Ratings
from Global Scale Ratings". While NSRs have no inherent absolute
meaning in terms of default risk or expected loss, a historical
probability of default consistent with a given NSR can be inferred from
the GSR to which it maps back at that particular point in time.
For information on the historical default rates associated with different
global scale rating categories over different investment horizons,
please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1216309.
REGULATORY DISCLOSURES
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The date of the last Credit Rating Action was 10/06/2020.
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Aneliza Crnugelj
Asst Vice President - Analyst
Infrastructure Finance Group
Moody's America Latina Ltda.
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