Approximately BRL 500 million of debt instruments affected
Sao Paulo, September 21, 2010 -- Moody's America Latina Ltda (Moody's) assigned issuer ratings
of Baa3 on the global scale and Aa1.br on the Brazilian National
Scale to Concessionaria Rodovia Presidente Dutra S/A (NovaDutra).
At the same time, Moody's assigned ratings of Baa3 and Aa1.br
to NovaDutra's 5-year BRL300 million senior debentures secured
by floating guarantees and Ba1 and Aa2.br to 5-year BRL200
million subordinated debentures. The outlook is stable for all
ratings. This is the first time Moody's has assigned ratings
The proposed debentures in the amount of BRL500 million will be used to
replace BRL390 million of short-term debt and to support the company's
capital expenditures in the near term.
..Issuer: CONCESSIONARIA RODOVIA PRES. DUTRA
....Issuer Rating: Baa3 (global scale)
/ Aa1.br (Brazilian national scale)
....BRL300 million debentures secured by floating
guarantee: Baa3 / Aa1.br
....BRL200 million subordinated debentures:
Ba1 / Aa2.br
The Baa3 global scale and Aa1.br national scale issuer ratings
reflect the essential role of NovaDutra's highway in one of the most densely
populated and economically critical regions of the country with an alignment
that connects Sao Paulo with Rio de Janeiro. The ratings also reflect
the mature nature of the concession, as evidenced by an operating
track record that dates back to 1996. The relatively stable regulatory
environment for operating toll roads in Brazil and NovaDutra's strong
credit metrics for the rating category further support the ratings.
The risks associated with significant capital expenditures constrain the
rating, as do the high level of investment activity of its controlling
shareholder and the limited structural provisions embedded in the debentures.
Additional constraints are the relatively short remaining life of the
concession, which expires in ten years, and the strong competition
from the alternative route, the Ayrton Senna road.
Moody's has rated the first tranche of debentures in the amount
of BRL300 million at the same level as the NovaDutra's senior unsecured
issuer rating to reflect the expected repayment of this debt instrument
arising from its floating guarantee. Creditors with a floating
guarantee are senior to any unsecured holders in the priority of claims,
but junior to any debt that is secured by specific tangible assets.
Moody's has rated the second tranche of debentures in the amount
of BRL200 million one notch lower than the NovaDutra's issuer rating to
reflect the subordination of the debentures to any other debt.
In accordance with the Brazilian Corporations Law any unsecured debt in
excess of a company's equity capital is required to be subordinated to
any other existing or future debt. As of June 30, 2010,
and pro-forma for the new transaction, the BRL300 million
senior unsecured and the BRL200 million subordinated will be virtually
the only two classes outstanding debt of NovaDutra.
Credit enhancements embedded in the documentation of the proposed debentures
reviewed to date include restrictions on dividend payments. A payout
ratio beyond the minimum legal requirement of 25% will be allowed
only if the Net Debt to EBITDA ratio is below 4.0 times and the
Debt Service Coverage Ratio is higher than 1.2 times. Additional
limitations are offered by the concession agreement that requires equity
capital to remain above 20% of the accumulated investments in the
While a higher leverage restricts dividend distribution, it does
not trigger an early maturity event. There are no limitations on
additional debt issues ranking above the proposed debt classes or cross
default provisions with the parent company and any other debt within the
CCR group. There are also no limitations on the provision of intercompany
Despite the relatively loose debt structure, Moody's views
the risk of any major cash drains from NovaDutra funding new CCR group
projects as relatively low in the near term. This view considers
CCR's strong liquidity position, which is supported by a BRL1.5
billion cash position outstanding at the holding company level as of June
30, 2010. CCR has historically enjoyed access to the local
banking and capital markets and financing for its various concessions
has been mostly in the form of non-recourse long-term project
finance debt. Additionally, CCR's access to NovaDutra's cash
flows is limited as a result of this subsidiary's investment requirements
and regulatory oversight.
NovaDutra is committed to a significant capital expenditures program estimated
at approximately BRL900 million through 2014. The program's
primary goal is to reduce traffic congestion (de-bottlenecking),
which includes the construction of 22 kilometers of side lanes for local
traffic in the metropolitan areas of Sao Paulo, Sao Jose dos Campos
and Rio de Janeiro by 2012. A conservative scenario also considers
the potential of new investments for road duplication in the Araras'
hills in the 2012 to 2014 period, which could bring total capital
expenditures to BRL 1.5 billion over the next five years.
The terms and conditions for these additional investments are still under
negotiation with the federal concession authority, Agencia Nacional
de Transportes Terrestres (ANTT). The ultimate magnitude and timing
of the capital investment program could exert pressure on NovaDutra's
From a credit perspective, the federal regulatory framework in Brazil
is considered adequate in terms of transparency for the tariff setting
mechanisms and also in terms of protection against events outside the
control of the concessionaire. The ANTT has been generally supportive
of toll road operators in the country, as recently illustrated by
its approval of NovaDutra's relocation of its toll plazas in order
to restore the economic equilibrium lost in 2009 after the concession
of the Ayrton Senna Road.
NovaDutra has strong credit metrics for the rating category, characterized
by a very low leverage to date as measured by the last three-year
average Funds From Operations to debt ratio of 164% and Cash interest
coverage of 13.0x. Credit metrics have been supported by
solid revenue growth. Toll road related revenues in 2009 rose 4.5%
over the previous year, following years of strong growth of 12.4%
in 2008 and 8.8% in 2007. The increase in competition
and unfavorable economic conditions negatively affected toll revenues
in 2009, but they have recently rebounded as demonstrated by the
13.7% toll revenue increase during the first half of this
Despite strong revenue growth, Moody's expects NovaDutra's
credit metrics to weaken in the years to come. As a mature concession,
NovaDutra is expected to maintain a high dividend payout ratio.
This high dividend distribution, along with a significant capital
expenditure program, will likely result in increased leverage.
Moody's foresees the cash interest coverage ratio deteriorating
to approximately 4.0x over the next five years while the FFO to
debt ratio will remain in the 35-40% range.
The stable outlook reflects Moody's opinion that growth in traffic
volume should continue to provide the company with strong cash generation
and relatively low leverage. Traffic levels should be helped by
the 4-5% annual growth expected for Brazilian GDP in 2011
and thereafter. Moody's expects an increase in leverage and
dividend distributions to be prudently managed, so that credit metrics
remain adequate for the assigned rating.
Moody's would consider an upgrade if the company steadily improves
its liquidity profile and achieves sustained credit metrics that exceed
expected performance, so that leverage, as measured by the
FFO to debt ratio, remains above 45% and cash debt interest
coverage ratio stays above 6.0x on a sustainable basis; or
if there is a significant extension of the concession tenor.
A deterioration in NovaDutra's operating performance so that the
FFO to debt ratio falls below 25% and the cash interest coverage
ratio falls below 4.0x for an extended period could result in a
rating downgrade. A weakened liquidity profile along with tighter
than expected financial covenants could also trigger a downgrade action.
The ratings of the senior unsecured and subordinated debentures could
also be downgraded if NovaDutra were to issue additional debt that ranks
above the current debentures in the priority of claims or were to create
cross default provisions with the parent company and any other debt within
the CCR group.
The principal methodology used in rating NovaDutra was the Operational
Toll Roads Rating Methodology (December 12, 2006), which can
be found at www.moodys.com in the Rating Methodologies sub-directory
under the Research & Ratings tab. Other methodologies and factors
that may have been considered in the process of rating this issuer can
also be found in the Rating Methodologies sub-directory on Moody's
NovaDutra is an operating subsidiary of Companhia de Concessoes Rodoviarias
(CCR, unrated), one of Brazil's largest toll-road
concession groups, which controls approximately 1,577 kilometers
of toll road concessions. CCR is controlled by a consortium of
AGConcessoes, Camargo Correa, Brisa and Soares Penido Concessoes.
CCR's consolidated revenues attained BRL3.4 billion (USD1.9
billion) and an EBITDA of BRL2.2 billion (USD1.2 billion)
in the last 12 months ended June 30, 2010, of which NovaDutra
accounted for 23% and 18%, respectively.
NovaDutra holds a 25-year concession to operate the toll road services
of the Presidente Dutra highway (BR-116 RJ/SP), a 402-kilometer
toll road linking the nation's two most important metropolitan regions:
Sao Paulo and Rio de Janeiro, which the federal regulatory agency,
Agencia Nacional de Transportes Terrestres (ANTT), granted in October
1995. In 2009, the company reported an annual tolled traffic
of 127.7 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, and confidential and proprietary Moody's
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
MOODY'S adopts all necessary measures so that the information it uses
in assigning a credit 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.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
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 Baa3 and Aa1.br issuer ratings to NovaDutra; outlook stable
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