Approximately BRL2.0 billion of debt instruments rated
Sao Paulo, April 06, 2011 -- Moody's America Latina (Moody's) assigned Issuer Ratings of Ba1
on the global scale and Aa2.br on the Brazilian national scale
to CCR S.A (CCR). At the same time, Moody's
assigned a Ba1 local currency rating on the global scale and Aa2.br
rating on the Brazilian national scale to up to BRL2.0 billion
in senior unsecured debentures to be issued by Concessionária Rodoanel
Oeste S.A. (Rodoanel Oeste), which are 95%
guaranteed by CCR and 5% guaranteed by Encalso Construções
LTDA. (Encalso). The outlook is stable for all the ratings.
This is the first time Moody's has assigned ratings to CCR.
The debentures will be issued in three series with maturity dates in three,
four and five years. These issues are being offered under CVM's
Regulation 476 with a firm underwriting commitment for up to BRL1.75
billion from the arranging banks HSBC and Bradesco BBI. The proceeds
will be used to replace more expensive debt outstanding in the balance
sheet of Rodoanel Oeste and eliminate its foreign currency debt exposure.
Issuer: CCR S.A. (CCR)
Issuer Ratings: Ba1/Aa2.br
Issuer: Concessionária Rodoanel Oeste S.A.
....up to BRL1.25 billion senior unsecured
debentures guaranteed by CCR due in three and four years: Ba1 /
.BRL750 million senior unsecured debentures guaranteed
by CCR due in five years: Ba1 / Aa2.br
The Ba1/Aa2.br issuer rating of CCR reflects its parent company
position of one of Brazil's largest toll-road concession
groups which Moody's view as an investment grade on a consolidated
basis. It holds a diversified portfolio of long-term operating
toll road concessions that are strategically located in some of the most
well-developed and economically robust regions of the country.
"The ratings consider the mature nature of the majority of CCR's
concessions, evidenced by a solid track record of toll traffic that
has generated high operating margins and predictable cash flows",
said Moody's Analyst Cristiane Spercel. "The ratings
also consider its experienced management team, which has been developing
constructive relationships with the regulatory authorities for its concessions."
CCR's above-average corporate governance practices further
support the ratings.
Nevertheless, CCR's ambitious investment strategy and track
record of high dividend payments to shareholders could negatively impact
the ratings. In Moody's opinion, CCR has shown a willingness
to pursue strategic corporate activities in the Brazilian infrastructure
sector that would cause a leverage increase. Although CCR has so
far demonstrated a moderate appetite for risk and consistent financial
discipline, Moody's remains concerned that additional investments
could lead to a deterioration in the company's already tight liquidity
profile and further borrowing needs when capital markets are not necessarily
The Ba1/Aa2.br ratings assigned to the Rodoanel Oeste's proposed
BRL2.0 billion senior unsecured debentures reflect the support
of a corporate guarantee from CCR. The indenture that documents
the debentures does not have provisions for a debt service reserve account
to ensure a timely payment in the event of Rodoanel Oeste' default.
Nevertheless, the documentation related to the CCR guarantee provides
adequate assurance of the validity and binding nature of the guarantee.
While a late payment could result in a default event, the ratings
on the debentures reflect the low probability of loss because of the expected
payment by a Ba1/Aa2.br rated guarantor.
On a consolidated basis, CCR's credit metrics reflect an investment
grade profile commensurate with a Baa3 rating. The issuer ratings
and the ratings assigned to CCR's guaranteed debentures are rated
one notch lower to reflect the structural subordination of obligations
at the level of CCR holding company to other debt at the level of its
operating companies. The CCR holding company largely depends on
the regular upstreaming of dividends from its operating subsidiaries to
meet its own obligations, including debt service, equity investment
commitments and eventual cash requirements related to its guarantees.
Despite the important role that Rodoanel Oestes fills as a segment of
a ring road connecting the main routes in the west metropolitan area of
Sao Paulo and the relatively stable regulatory environment for toll road
concessions in the State of Sao Paulo, its credit profile is weak
as a result of its insufficient cash flow generation to service its debt
in the short to medium term.
The tighter economic conditions that constrained Brazilian GDP growth
in 2009 significantly impaired the traffic volumes at Rodoanel Oeste.
The opening of the Rodoanel South section in April 2010 coupled with municipal
restrictions on commercial vehicles on Rodoanel's untolled competing
routes (i.e., Marginal Pinheiros, Bandeirantes
and Roberto Marinho Avenues), contributed to traffic volumes recovering
last year. In spite of these gains, Moody's estimates
that current traffic volumes at Rodoanel Oeste are still 20% below
the initial forecast, which will delay the project's breakeven
Obtaining long-term financing for this project in the middle of
the global liquidity crunch was also a challenge. The bridge loans
that supported the initial concession fee payments were refinanced only
by the end of 2009, when Rodoanel Oeste successfully closed USD500
million (about BRL870 million) long-term loans with the Inter-American
Development Bank (IDB) and the Japan bank for International Cooperation
(JBIC). At the same time, it issued 3-year BRL750
million debentures in the local market.
Shareholders have provided Rodoanel Oeste with its remaining funding requirements.
Until December 31, 2010, they had made equity injections of
BRL200 million and timely intercompany loans amounting to BRL741 million.
While acknowledging the financial support provided by the shareholders,
Moody's sees the strategy of relying on intercompany loans as a
credit negative for Rodoanel Oeste given the lack of ring-fencing
provisions to enforce the subordination of these intercompany loans to
other debts of the concessionaire. Since this concession is not
expected to generate positive free cash flows to support any dividend
distributions or reductions in the intercompany loans during the next
5 years, Moody's estimates that Rodoanel Oeste's will
require another BRL400 million from the shareholders to support its cash
needs during this period, including debt service on the proposed
debentures. Further support from the shareholders may be required
for the take out of the proposed debentures at maturity if the capital
markets are not favorable.
Moody's is confident that CCR will continue to support Rodoanel
Oeste on a timely basis given the strategic importance of this asset to
its portfolio of concessions in the state of Sao Paulo and the existing
cross-default provisions embedded in several other debt arrangements
within the group.
The CCR group has a strong track record of sizeable investments that include
participating in auctions for new concessions and acquiring operating
companies. For example, it acquired Rodovias Integradas do
Oeste S/A, a 516- kilometer concession in the state of Sao
Paulo, for approximately BRL1.3 billion in October 2010.
Notwithstanding its strategy of pursuing opportunistic investments in
the transportation industry, CCR has historically behaved like a
prudent investor, only seeking new ventures that present an expectation
of a reasonable rate of return. This is evidenced by the company's
strong consolidated credit metrics for the rating category, including
an average Funds From Operations (FFO) to debt ratio of 16.5%
for the last three years and an interest coverage ratio higher than 3.2x
during the same period. The financial covenants embedded in the
debentures largely limit additional leverage on a consolidated basis.
The covenants require the net-debt-to-EBITDA ratio
to be lower than 4.0 times and the EBITDA-to-net-interest
expenses higher than 2.0 times.
On a consolidated basis, CCR has a tight liquidity position that
is not typical of investment grade companies, as shown by BRL2.3
billion in short-term debt (including Moody's standard adjustments
for concession liabilities and refinanced taxes) vis-à-vis
a cash position of BRL1.2 billion as of December 31, 2010.
The refinancing risk however, is largely mitigated by CCR's
strong operating cash generation from essential public infrastructure
assets, which has been in the range of BRL1.3 billion to
BRL1.6 billion per year. Additionally, CCR's
access to the local banking and capital markets has been resilient supported
by an experienced management team and relatively high corporate governance
standards as compared to local peers. The BRL1.2 billion
equity offer in October 2009 is an additional example supporting this
As a holding company, dividends from operating subsidiaries are
CCR' primary source of liquidity. Other sources of cash include
intercompany revenues from administrative, financial and engineering
service agreements with the affiliates. In 2009 and 2010,
the operating toll concessions distributed approximately BRL790 million
in dividends to the parent company each year. Moody's notes
that the debt service at the level of these operating subsidiaries constrain
these dividends. Debt at the level of these subsidiaries represent
about 88% of CCR's consolidated debt. Even so, Moody's
consider these dividends a reliable source of cash given the mature concession
profile of the operating toll roads. For the next few years,
Moody's foresees that the annual flow of dividends and intercompany revenues
from the operating subsidiaries will cover CCR's overhead expenses
and payments for debt service. Additional debt may be required
to support new investments and high dividend distributions.
The stable outlook reflects Moody's opinion that CCR will continue to
show strong credit fundamentals, which will be boosted by expected
growth in the Brazilian GDP. Moody's expects that dividend payments
as well as additional investments will be prudently managed so that CCR's
consolidated credit metrics remain within the current rating category
while the current barely adequate liquidity position is preserved or strengthen.
Moody's expects the credit profile of Rodoanel will remain weak
over the next several years and thus the company will likely continue
to rely on the timely and strong financial support of its shareholders.
The rating or outlook could be upgraded if CCR were to steadily improve
its liquidity profile and produce consolidated credit metrics that exceed
historical performance so that the FFO to debt ratio stays above 25%
and interest coverage stays above 3.5x on a sustainable basis.
The rating or the outlook could be downgraded if there is a deterioration
in CCR's liquidity position or a significant and sustained deterioration
in its consolidated credit metrics so that FFO to debt ratio falls below
15% and interest coverage ratio remains below 2.5x for an
extended period of time. A perception of deterioration in the level
of support from the shareholders to Rodoanel Oeste could also trigger
a downgrade of the rated debentures.
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 (GSR) 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
The principal methodology used in rating CCR was the Operational Toll
Roads rating methodology published in December 2006.
Concessionaria do Rodoanel Oeste S.A. (Rodoanel Oeste) holds
a 30 year concession to operate the toll road service of the West section
of Rodoanel Mário Covas, a 32 kilometer concession in the
State of Sao Paulo, which the state regulatory agency, Agência
Reguladora de Serviços Públicos Delegados de Transporte
(ARTESP), granted in June 2008. Built in 2002, the
Rodoanel Oeste is a 32-kilometer section of the ring road surrounding
the metropolitan area of Sao Paulo that connects some of the most important
highways in the State, such as Rodovia dos Bandeirantes, Rodovia
Anhanguera, Rodovia Castello Branco, Rodovia Raposo Tavares
(all CCR's subsidiaries) and Rodovia Regis Bittencourt.
Rodoanel Oeste is an operating subsidiary of CCR S.A. (CCR),
one of Brazil's largest toll-road concession groups,
which controls approximately 2,093 kilometers of toll road concessions.
CCR was created in 1998 and currently controls eight toll-road
concessions in the states of Sao Paulo, Rio de Janeiro and Parana,
with terms ranging from 2015 to 2038. CCR also owns Actua and Engelog,
companies that perform operating and maintenance services for its highway
networks. In addition, CCR Group participates with minority
interests in Renovias, ViaQuatro, Controlar and STP.
CCR's consolidated net revenues, adjusted to exclude the IFRS construction
revenues, attained BRL3.7 billion (USD2.1 billion)
and an EBITDA of BRL 2.4 billion (USD1.4 billion) in 2010,
of which Rodoanel Oeste accounted for 4% and 2%, respectively.
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 information, and confidential and proprietary Moody's Analytics
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
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in assigning a credit rating is of sufficient quality and from sources
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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.
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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 a Aa2.br rating to Rodoanel Oeste's debentures guaranteed by CCR; outlook stable
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