Aeroporti di Roma's Baa3 rating confirmed with negative outlook
Madrid, March 02, 2020 -- Moody's Investors Service, (Moody's) has today downgraded
to Ba3 from Ba2 the senior unsecured rating and to (P)Ba3 from (P)Ba2
the rating of the euro medium-term note (EMTN) programme of Atlantia
S.p.A. (Atlantia). Moody's also downgraded
to Ba2 from Ba1 the corporate family rating of Atlantia. Concurrently,
Moody's downgraded to Ba3 from Ba1 the senior unsecured ratings
and to (P)Ba3 from (P)Ba1 the senior unsecured EMTN programme rating of
toll road operator Autostrade per l'Italia S.p.A.
(ASPI). Moody's also confirmed the Baa3 senior unsecured and underlying
senior secured ratings and the (P)Baa3 senior unsecured EMTN programme
rating of airport operator Aeroporti di Roma S.p.A.
(ADR). The outlook on all ratings is negative.
The rating action concludes the review initiated on 3 January 2020.
A full list of affected ratings is provided towards the end of this press
release.
RATINGS RATIONALE
The rating action reflects the increasing political pressure on the Atlantia's
group and downside risks following the conversion into law of the Decree-Law
No 162 of 30 December 2019 (Milleproroghe), by which the Italian
government retroactively and unilaterally changed the terms and conditions
of toll road concessions in the country, including that of ASPI.
Even if the new law will most likely be challenged in Italian and European
courts and could be ultimately reversed, it further weakens the
position of ASPI and Atlantia.
The downgrade of ASPI and Atlantia's ratings also reflects the apparent
lack of progress in discussions linked to the future of the ASPI concession,
which suggests that (1) an agreement on the renegotiation of the concession
could be difficult to reach, given the fragmented views within the
government coalition on how to resolve the ASPI situation; (2) that
any potential outcome of the negotiation will result in terms much less
favourable for ASPI than the current framework; and (3) that the
government may attempt further detrimental actions against ASPI.
A more confrontational stance by government and a rigid position on the
part of Atlantia and ASPI may result in long legal battles involving Italian
and European courts, which will increase the uncertainties for debtholders.
The confirmation of ADR's Baa3 ratings reflects its stronger underlying
credit profile, the standalone nature of ADR's asset and financing
arrangements, and some protections included in its concession contract
that provides for partial delinkage from the wider group.
The negative outlook on the ratings reflect the persistent uncertainties
and downside risks linked to the ultimate consequences of the collapse
of the Polcevera viaduct on the Atlantia group's credit profile,
which could result in the renegotiation of the ASPI concession and,
in a downside scenario, revocation of the concession, thus
increasing uncertainties and exposing the group to the risk of lengthy
litigation procedures and sizeable fines.
Since the collapse of the Polcevera viaduct, in August 2018,
Atlantia´s group has faced (1) heightened regulatory pressures,
as evidenced by the imposed toll freeze for 2020; (2) increased scrutiny
of ASPI's motorway assets that are expected to result in additional
maintenance costs; (3) legal investigations on ASPI's and SPEA's
(an engineering subsidiary of Atlantia) employees who allegedly submitted
inaccurate reports on the maintenance of two bridges, which,
if proven, would highlight potential shortfalls in the group's
control functions and undermine its credibility; (4) increasing political
pressure from the government; and (5) persistent uncertainties in
respect of the future of ASPI's concession.
The provisions for motorway concessions included in the Law No 8 of 28
February 2020, which ratifies the Milleproroghe, follows the
stagnation of the discussions with the Ministry of Transport and Infrastructure
(MIT) over a potential renegotiation of ASPI's concession.
The Law, if enforced, will negatively impact the group in
case of revocation of ASPI´s concession for material and continued
non-performance given that (1) compensation on termination would
be reduced by more than half as compared to the amount originally established
in ASPI's concession; (2) it would be possible for the concession
to be terminated even before the relevant compensation payment has been
paid, potentially leaving creditors exposed without either a capital
repayment or ongoing source of cashflow income to service debt; and
(3) the legislation removes ASPI's right to terminate the concession
contract and receive full compensation as a result of the changes in contractual
terms.
The government's determination to pursue these changes in toll roads
concessions despite the scope for legal challenges, even at the
European level, evidences the strong political pressure on ASPI
and Atlantia irrespective of the existing legal framework. However,
while some government officials continue to indicate that a decision on
the future of the ASPI concession will be taken in the coming months,
the expectation that the government will revoke ASPI's concession
is still not Moody's current base case because (1) the precise cause(s)
of the Genoa incident and associated responsibilities have not been yet
determined by the Italian court; (2) the government would be exposed
to a lengthy litigation process and the risks of a multi-billion
compensation payment given the retroactive and unilateral changes in ASPI's
strong protections in the concession agreement; and (3) the government
does not currently have sufficient resources to manage ASPI's network
and other companies may be reluctant to take over the concession without
a transparent and predictable regulatory framework.
In light of the changes in ASPI's concession terms and protracted
uncertainties, Moody's will continue to monitor the liquidity and
financial flexibility exhibited by the Atlantia group, the continued
ability to access new funding, as well as measures aimed at preserving
cash to mitigate the financial impact of the bridge collapse.
Notwithstanding the persistent downside risks linked to the collapse of
the Polcevera viaduct that impacts ASPI, the Ba2 corporate family
rating of the Atlantia group is supported by (1) the additional financial
flexibility and sources of cash provided by Atlantia's other subsidiaries
and equity investments; (2) Atlantia's large size and focus
on the toll road and airport sectors; (3) the strong fundamentals
of the group's toll road network, which is increasingly diversified
following the acquisition of Abertis Infraestructuras S.A.
(Abertis) and comprises essential motorway links mostly located in Spain,
France, Italy, Chile, Brazil and also Mexico in the
near future; (4) the reasonably established regulatory framework
for its toll road operations, albeit characterised by increasing
political pressures in Italy; and (5) a track record of relatively
prudent financial policies. These factors are balanced by (1) the
group's fairly complex structure following the Abertis acquisition;
(2) the relatively shorter average concession life of the combined Atlantia-Abertis
group; and (3) the material increase in consolidated debt leverage
post acquisition of Abertis.
Atlantia's Ba3 rating is positioned one notch below the group's corporate
family rating, reflecting the structural subordination of the creditors
at the holding company level. ASPI's Ba3 rating reflects the ongoing
uncertainties related to the potential renegotiation of its concession
contract and, in a downside scenario, the potential for revocation
of its concession agreement. ADR's Baa3 rating reflects the
stronger stand-alone credit profile of the entity and some delinkage
from the wider group's credit quality.
RATIONALE FOR THE NEGATIVE OUTLOOK
The outlook on Atlantia's, ASPI's and ADR's ratings is negative,
reflecting the persistent uncertainties and the risks associated with
the potential consequences of the collapse of the Polcevera viaduct on
the group's credit profile.
WHAT COULD CHANGE THE RATING UP/DOWN
In light of the current negative outlook, upward rating pressure
on Atlantia's, ASPI's and ADR's ratings is highly unlikely in the
near future. The outlook could be returned to stable if there was
clarity in respect of the consequences of the collapse of the Polcevera
viaduct on the group's credit quality, which would not result in
any addition negative impact on its business and financial profile.
Downward pressure on Atlantia's and ASPI's ratings would materialise in
case (1) current criminal investigations were to identify breaches in
the management of ASPI's motorway infrastructure or ASPI's
direct responsibility in the collapse of the Polcevera viaduct; (2)
the start of the revocation process of ASPI's concession or any additional
detrimental government actions linked to a revocation scenario,
with the magnitude of any downgrade also depending on the potential size
and timing of any compensation payment that ASPI may receive; and
(3) there was a significant deterioration in the liquidity profile of
the Atlantia group.
With regard to ADR, notwithstanding some delinkage from the wider
group's credit quality, negative pressures on Atlantia's consolidated
credit quality would put downward pressure on the company's rating.
In addition, negative pressure on ADR's rating would also result
from (1) a weakening of the company's financial profile, that could
result in funds from operations (FFO)/debt ratio below 15%;
(2) substantial negative impact related to the coronavirus outbreak,
which could dampen international passenger volumes and affect the already
weak financial profile of Alitalia; or (3) evidence of political
interference, inconsistent implementation of the tariff-setting
framework or material changes in the terms and conditions of ADR's concession.
PRINCIPAL METHODOLOGIES
The principal methodology used in rating Atlantia S.p.A.
and Autostrade per l'Italia S.p.A. was Privately
Managed Toll Roads published in October 2017. The principal methodology
used in rating Aeroporti di Roma S.p.A. was Privately
Managed Airports and Related Issuers published in September 2017.
Please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
LIST OF AFFECTED RATINGS
Downgrades, previously on review for downgrade:
..Issuer: Atlantia S.p.A.
.... LT Corporate Family Rating, Downgraded
to Ba2 from Ba1
....Senior Unsecured Medium-Term Note
Program, Downgraded to (P)Ba3 from (P)Ba2
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Ba3 from Ba2
..Issuer: Autostrade per l'Italia S.p.A.
....Senior Unsecured Medium-Term Note
Program, Downgraded to (P)Ba3 from (P)Ba1
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Ba3 from Ba1
....BACKED Senior Unsecured Regular Bond/Debenture,
Downgraded to Ba3 from Ba1
Confirmations, previously on review for downgrade:
..Issuer: Aeroporti di Roma S.p.A.
....Senior Unsecured Medium-Term Note
Program, Confirmed at (P)Baa3
.... Underlying Senior Secured Regular Bond/Debenture,
Confirmed at Baa3
....Senior Unsecured Regular Bond/Debenture,
Confirmed at Baa3
Outlook Actions:
..Issuer: Atlantia S.p.A.
....Outlook, Changed To Negative From
Rating Under Review
..Issuer: Autostrade per l'Italia S.p.A.
....Outlook, Changed To Negative From
Rating Under Review
..Issuer: Aeroporti di Roma S.p.A.
....Outlook, Changed To Negative From
Rating Under Review
Atlantia S.p.A. is the holding company for a group
active in the infrastructure sector. Its main subsidiaries include
Autostrade per l'Italia S.p.A., Abertis Infraestructuras
S.A., Aeroporti di Roma S.p.A.
and Azzurra Aeroporti S.r.l. (holding company for
Aéroports de la Côte d'Azur, the latter rated Baa2
under review for downgrade).
Autostrade per l'Italia S.p.A. is the country's largest
operator of tolled motorways, which together with its subsidiaries,
manages a network of 3,020 km of motorways under long-term
concession agreements granted by the Italian government.
Aeroporti di Roma S.p.A. is the concessionaire for
the Rome airport system, which reported total passenger volumes
of 49.4 million in 2019.
REGULATORY DISCLOSURES
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.
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.
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
Neil Griffiths-Lambeth
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
