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Rating Action:

Moody's assigns a Baa3 rating to new Notes issued by Azzurra; negative outlook

21 Jul 2020

Madrid, July 21, 2020 -- Moody's Investors Service, ("Moody's") has today assigned a Baa3 rating to the proposed senior secured notes (the Notes) to be issued by Azzurra Aeroporti S.p.A. (Azzurra), the holding company of Aéroports de la Côte d'Azur (ACA), the airport operator in Nice, Cannes and Saint Tropez. The outlook on the rating is negative.

The Notes, which will be split into two tranches with different maturities, are expected to have a cumulative amount of approximately €660 million. Net proceeds from the issuance will be used to repay the outstanding €653 million senior secured bank credit facility of Azzurra maturing in November 2021, which is currently rated at Baa3.

RATINGS RATIONALE

The Baa3 rating of the Notes reflects that notwithstanding the severe reduction in cash flow in 2020 due to the coronavirus outbreak, Moody's expects a gradual recovery in traffic volumes, which together with the implementation of tariff increases and cost-cutting measures, will support an improvement in key credit metrics for the Azzurra group over the coming two to three years to levels commensurate with the current ratings. The Baa3 rating further takes account of the supportive features of the debt documentation, which offer some protections to creditors and limits Azzurra's ability to upstream cash to its shareholders subject to leverage tests.

The negative outlook of Azzurra's rating reflects the group's credit risks arising from the decline in traffic and the uncertainties around recovery prospects, with the risk of an extended disruption to travel causing further strain on the group's balance sheet and liquidity.

More generally, the Baa3 rating of Azzurra primarily reflects the underlying credit quality of ACA, which benefits from (1) the strong fundamentals of Nice airport as the largest regional airport in France, with limited competition; (2) the high proportion of origin and destination passengers and diversified carrier base, with no meaningful exposure to weak airlines; (3) the solid traffic profile demonstrated in the past, characterised by a significant traffic component from EU countries and short-haul flights; and (4) the expectation that future tariff increases, even if moderate, will allow ACA to improve its profitability over time. These strengths are partially offset by (1) Azzurra group's high financial leverage; and (2) a degree of structural subordination of the creditors at Azzurra Aeroporti coupled with the significant presence of minority shareholders at ACA.

Following the refinancing of Azzurra's senior secured bank facilities, the group liquidity profile will improve, with no significant debt repayments or maturities in the next two to three years. Moody's understands that as of June 2020, the group had approximately €110 million in cash and €50 million in available bank lines. Therefore, Moody´s expects that the Azzurra group would be able to cover all its cash requirements, including debt and interest payments, even if the group earnings were to significantly decrease. In addition, as required under the terms of the new Notes, Azzurra will maintain a letter of credit from an investment grade counterparty equal to the next six-month's worth of interest payment.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Given the current negative outlook, upward rating pressure is unlikely in the near future. The outlook of Azzurra could be stabilised if following a return to normal traffic performance, (1) the group's financial profile and key credit metrics sustainably return to levels commensurate with the current rating, such that funds from operations (FFO)/debt is at least 10%; (2) there is sufficient clarity around the tariff evolution over the medium to long term; and (3) the group exhibit a strong liquidity profile.

The ratings could be downgraded if (1) it is likely that the group's credit metrics would not return to the levels commensurate with the current rating; (2) ACA is not allowed to increase tariffs in order to restore its profitability; (3) the group's liquidity profile deteriorates; or (4) it is likely that the coronavirus outbreak will have a more severe or sustained detrimental impact on traffic levels. A material deterioration in the credit quality of Atlantia could also exert downward pressure on the group's credit profile.

The principal methodology used in these ratings was Privately Managed Airports and Related Issuers published in September 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1092224. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Azzurra Aeroporti S.p.A. is the holding company of Aéroports de la Côte d'Azur, whose main assets are Nice and Cannes Mandelieu airports operated under a concession expiring on 31 December 2044 and Saint Tropez airport (held freehold). Azzurra is owned by a consortium comprising the Italian infrastructure group Atlantia S.p.A. (52.7%), Aeroporti di Roma S.p.A. (7.8%), EDF Invest (19.4%) and the Principality of Monaco (20.1%).

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.

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.

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.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

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 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.

Erica Gauto Flesch
Vice President - Senior Analyst
Infrastructure Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

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

Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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