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Rating Action:

Moody's assigns Ba2/Aa2.br ratings to CCR's BRL960 million new debenture issuance; stable outlook

 The document has been translated in other languages

25 Nov 2020

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

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.

Information sources used to prepare the rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's information.

Information types used to prepare the rating are the following: financial data, debt documentations, and Moody's information.

Sources of Public Information: Moody's considers public information from many third party sources as part of the rating process. These sources may include, but are not limited to, the list available in the link http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1235261.

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 considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

The ratings have 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 Service(s) to the rated entity or its related third parties within the 12 months preceding the credit rating action. Please go to the report "Ancillary or Other Permissible Services Provided to Entities Rated by Moody's America Latina Ltda." in the link http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1251596 for detailed information.

Entities rated by Moody's America Latina Ltda. and the rated entities' related parties may also receive products/services provided by parties related to Moody's America Latina Ltda. engaging in credit ratings activities within the 12 months preceding the credit rating action. Please go to the link http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1251611 for a list of entities receiving products/services from these related entities and the products/services received.

The date of the last Credit Rating Action was 10/06/2020.

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, 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.br.

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.

Please see ratings tab on the issuer/entity page on www.moodys.com.br for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com.br for further information.

Please see Moody's Rating Symbols and Definitions on the Ratings Definitions page on www.moodys.com.br for further information on the meaning of each rating category and the definition of default and recovery.

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.

Please see www.moodys.com.br 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.br for additional regulatory disclosures for each credit rating.

Aneliza Crnugelj
Asst Vice President - Analyst
Infrastructure Finance Group
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 0 800 891 2518
Client Service: 1 212 553 1653

Alejandro Olivo
Associate Managing Director
Sub-Sovereign Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 0 800 891 2518
Client Service: 1 212 553 1653

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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