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Rating Action:

Moody's assigns (P)Baa2 rating to Atlantia's new EMTN programme; stable outlook

27 Oct 2016

London, 27 October 2016 -- Moody's Investors Service has today assigned a provisional (P)Baa2 rating to the new EUR3 billion euro medium-term note (EMTN) programme of Atlantia S.p.A. (Atlantia). Concurrently, Moody's affirmed the (P)Baa1 and Baa1 ratings on the EUR10 billion long-term senior unsecured EMTN programme and the long-term senior unsecured notes of Atlantia, respectively, which benefit from a guarantee from Autostrade per l'Italia S.p.A. (ASPI). The Baa1 long-term issuer rating, and the (P)Baa1 and Baa1 long-term senior unsecured EMTN programme and long-term senior unsecured ratings of ASPI, respectively, were also affirmed as part of this rating action. The outlook on all the ratings is stable.

RATINGS RATIONALE

The (P)Baa2 rating on the new EMTN programme of Atlantia is one notch below the consolidated credit quality of the group as reflected by the ratings of Atlantia debt that benefits from the guarantee of ASPI. The one notch difference reflects the structural subordination of the creditors at the holding company level.

The Baa1 consolidated credit quality of Atlantia takes account of (1) the large size of the group with presence in the toll road and airport sectors; (2) the strong fundamentals of the group's toll road networks, which comprise essential motorway links in Italy and are exposed to limited competition; (3) the reasonably established regulatory framework for toll road operations in Italy, albeit characterised by some political interference; (4) the group's fairly resilient performance despite weak traffic volumes on its domestic network in 2008-13; (5) the extensive capital expenditure programme in the context of the group's fairly high leverage; and (6) an element of international diversification with exposure to toll road activities, particularly in Chile and Brazil.

Moody's notes Atlantia's recently updated strategy, which includes a focus on increasing the group's international presence in the toll road and airport segments. The group's strategic objective is to increase the share of EBITDA generated by the overseas businesses from the current 14% of consolidated EBITDA. The acquisition of Aeroports de la Cote d'Azur, pending closing, fits into this strategy given the Nice airport's profile and exposure to international traffic, which has been the major driver of growth at European airports in the recent past. Moody's does not expect this refinement of strategy to result in a change of overall risk profile, given the rating agency's expectation that the group will continue to assess investment opportunities carefully before making commitments and will maintain its existing debt leverage targets.

With funds from operations (FFO)/debt of around 16.5% as of end-June 2016, Atlantia is comfortably positioned against Moody's guidance for the Baa1 rating, which includes FFO/debt at least in the low teens in percentage terms and FFO interest cover above 3.5x. On a net debt basis, FFO/net debt stood at 19% for the twelve months ending 30 June 2016, reflecting a significant amount of cash held on balance sheet, which gives the group additional flexibility at the current rating level.

The rating affirmation of Atlantia's Baa1 senior unsecured ratings reflects the position of the creditors in the capital structure of the group as the existing notes benefit from a guarantee from ASPI. Moody's notes that Atlantia has launched an issuer substitution process for its publicly listed notes and has announced its intention to seek the consent of the private placement noteholders to be transferred to ASPI. Following any such issuer substitution/transfer, the noteholders will benefit from a guarantee from Atlantia until 2025.

The rating affirmation of ASPI's ratings reflects the strength of the toll road activities but it further factors in the credit quality of the Atlantia group given the linkages and the absence of specific creditor protection features that would isolate ASPI from the wider group at present.

RATIONALE FOR STABLE OUTLOOK

The stable outlook reflects Moody's view that Atlantia will maintain a strong liquidity position and financial profile commensurate with the current rating. The stable outlook on ASPI's ratings reflects the stable outlook on Atlantia's ratings.

WHAT COULD CHANGE THE RATING UP/DOWN

A material improvement in the macroeconomic environment coupled with a strengthening of the financial profile could put upward rating pressure on Atlantia's rating. An improvement in the credit quality of the Atlantia group coupled with a continued strong financial performance of ASPI could result in upward rating pressure on ASPI's ratings.

Conversely, downward pressure on Atlantia's rating could develop if (1) the group's financial profile weakens so that FFO/debt falls below the low teens in percentage terms and FFO interest cover is below 3.5x; (2) there is a material change in the terms and conditions of key concessions or political interference; and (3) there is a material negative pressure on the Italian macroeconomic environment and the government of Italy's sovereign rating (Baa2 stable). A deterioration in the credit quality of Atlantia group would likely put downward pressure on ASPI's ratings.

PRINCIPAL METHODOLOGIES

The principal methodologies used in rating Atlantia S.p.A. were Privately Managed Toll Roads published in May 2014, and Privately Managed Airports and Related Issuers published in December 2014.

The principal methodology used in rating Autostrade per l'Italia S.p.A. was Privately Managed Toll Roads published in May 2014.

Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

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 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.

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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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

Joanna Fic
VP - Senior Credit Officer
Infrastructure Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Andrew Blease
Associate Managing Director
Infrastructure Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

No Related Data.
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