New York, December 08, 2017 -- Moody´s Investors Service ("Moody´s") assigned a Baa3
rating to Series A COP505 billion Senior Secured UVR Indexed Notes Due
2044 to be issued by Fideicomiso P.A. Concesion Ruta al
Mar (the Issuer), with Concesion Ruta al Mar S.A.S.
as co-obligor (the Project, or RaM). The outlook is
stable.
The notes will be issued in COP but are settled in USD. The Issuer
will use the proceeds raised in connection with the Notes offering to
partially fund the construction of the project, a toll road concession
awarded in 2015 as a Private Initiative under Colombia's 4G program.
Committed bank facilities in total notional amount of COP950 billion and
injected/committed equity from the sponsor in total amount of COP620.0
billion, backed by letters of credit from institutions rated at
least Baa3, will complement the remaining proceeds.
The Project encompasses the construction, rehabilitation,
and operations and maintenance of 491 km of tolled roads located in the
States of Antiochia, Cordoba, Bolivar, and Sucre,
in Colombia (Baa2 stable). It connects the manufacturing and consumer
centers in central Colombia to the country's northern coast,
which serves as a hub to several ports.
RATINGS RATIONALE
The project's credit profile is primarily driven by the overall
leverage and financial profile throughout its operating phase, best
measured through the average CLCR of 2.49x (Moody's Case)
during the first ten years of full operational activity and average actual
DSCRs of 1.64x (Moody's Case) over the life of the project.
Initial works encompass 113 km of new construction and another 224 km
of rehabilitation, still at an initial stage. The relatively
low complexity, progress obtained in required right of ways so far
(50.3%), and the concession agreement terms which
provide for caps on shared risks provide adequate mitigants. The
ability to partially deliver milestones in the occurrence of events which
most commonly cause delays in project delivery, and ultimately,
termination payments sized in excess of existing debt are elements which
provide further comfort.
The project has signed a fixed-priced lump-sum EPC contract
with Construcciones El Condor (unrated) which encompasses construction
works as well as management of right-of-ways, environmental
permitting/licensing, and utility network relocation. Key
credit strengths throughout the project's construction phase include
the contractor's experience in managing similar projects within
that region and the low complexity of works. The contractor's
track record of managing right-of-ways, environmental
permitting, and utility network relocation, particularly within
the Transversal de las Americas toll road, coupled with progress
obtained so far on RaM (50.3%), and the shared risk
allocations, provide comfort as to their ability to conclude works
without incurring into substantial delay penalties. The mechanisms
embedded in the concession agreement which allows for partial delivery
of works and/or delay penalties in the form of revenue deductions instead
of direct payments to the grantor provide flexibility in case of schedule
delays.
The credit weaknesses of the construction phase are the weak credit quality
of the sole construction contractor, with very few allocation to
subcontractors, and the limited visibility on the robustness of
the construction cost contingencies and profit margins embedded in the
EPC agreement. These act as the first layer of protection against
actual cost overruns within the original contractor's budget.
The relative size of the project to the construction contractor is substantial,
with annual spend close to 100% of average annual revenues (2015-2016),
and indicate limited financial flexibility to conclude the project in
case of cost overruns beyond contingencies and profit margins.
That being said, the project benefits from a performance bond equivalent
to 17.8% of construction costs, sufficient to withstand
the contractor's replacement as per the Independent Engineer's
analysis.
The project is fully exposed to traffic risk, with historical traffic
information on seven of the eight toll stations providing a base for traffic
projections. The expectation is however of important traffic ramp-up
as users get used to tariff increases in 2016/2017, the opening
of new toll plazas, and expected relocation of the Purgatorio toll
plaza. Additional traffic gains are expected following tariff increases
upon completion of overall works in 2021 and tariff increases in competing
roads later throughout the project's life, which overall place
RaM very competitively in terms of overall travel time, safety,
and transportation costs. Moody's traffic cases have been
adjusted to partially recognize these strengths, with an expected
CAGR of 3.9% in contrast to the independent traffic provider's
expectation of 5.0%.
The exposure to competing routes and the generally low income characteristic
of light traffic users provide for sensitivity to toll increases.
Historical traffic performance has shown volume decreases at times of
low economic performance. Nonetheless, the ability to pass
along accrued inflation to tariffs on an annual basis, and the mechanisms
embedded in the concession agreement for compensation to adverse scenarios
are positive qualitative factors.
Overall leverage metrics are relatively high for the assigned rating at
full project completion under the Moody's Cases, with FFO/Debt
and interest coverage ratios averaging 7% and 1.83x throughout
the first ten years of operations. Naturally, these ratios
improve with time given the fully amortizing nature of the debt structure.
DSCR metrics and the CLCR ratio average 1.59x and 2.49x,
respectively, for the same period and are more stable throughout
the transaction's life.
The overall credit profile throughout the operating phase is enhanced
by the strong structural features embedded in the transaction.
In addition to the standard six-month DSRA and six-month
O&M reserve accounts, the structure includes backward and forward
looking restricted payment tests set at 1.35x or 1.45x,
depending on how traffic performs throughout the construction period.
Other features include the validation of annual budgets which provide
incentives for the issuer to maintain a lean operating structure to manage
costs and expenses, as well as cash sweep mechanisms in case of
traffic overperformance, mitigating the risk of the debt schedule
extending beyond concession maturity in upside scenarios, adequately
preserving creditors position.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Upward rating pressure is unlikely before construction completion and
traffic ramp-up. However, upward rating pressure would
arise if the project performed close to its base case forecast after ramp-up
and completed construction on time and on budget.
The ratings could be downgraded in case of meaningful delays or cost overruns
during construction which cannot be passed through to the contractor or
compensated by the grantor. In addition, negative ratings
pressure can arise upon frustration on traffic ramp-up.
Fideicomiso P.A. Concesion Ruta al Mar (the Issuer) is a
trust under the laws of Colombia created for purposes of the operations
of Concesion Ruta al Mar S.A.S., a 491 km toll
road through four states in northern Colombia. The project is sponsored
by Construcciones El Condor (El Condor), a construction contractor
and infrastructure sponsor with 39 years of experience in building and
managing roadways, tunnels, and bridges. The company
has participated in 27 infrastructure projects in the country, including
the Transversal de las Americas and the Pacifico II and Pacifico III projects
granted under the 4G Program. On the construction front,
the company has been responsible for 2,150 km/lane of roadway work,
24.7 km of tunnels, and 3.8 km of major bridges.
The methodologies used this rating were Private Managed Toll Roads published
in October 2017 and Construction Risk in Privately-Financed Public
Infrastructure (PFI/PPP/P3) Projects published in June 2016. 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.
Bernardo Costa
Vice President - Senior Analyst
Public Proj & Infrastr Fin
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 800 891 2518
Client Service: 1 212 553 1653
Michael J. Mulvaney
MD - Project Finance
Public Proj & Infrastr Fin
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
