NOTE: On November 6, 2018, the press release was corrected as follows: The first sentence of the methodology paragraph was changed to “The methodologies used in these ratings were Privately Managed Airports and Related Issuers published in September 2017, and Government-Related Issuers published in June 2018.” Revised release follows.
New York, October 29, 2018 -- Moody's Investors Service ("Moody's") today downgraded
Mexico City Airport Trust NAFIN F/80460 (MEXCAT) $6 billion Senior
Secured Notes ratings to Baa3 from Baa1. The ratings were also
placed under review for further downgrade.
Downgrades:
..Issuer: Mexico City Airport Trust NAFIN F/80460
....Senior Secured Regular Bond/Debenture,
Downgraded to Baa3 from Baa1; Placed Under Review for further Downgrade
Outlook Actions:
..Issuer: Mexico City Airport Trust NAFIN F/80460
....Outlook, Changed To Rating Under
Review From Stable
RATINGS RATIONALE
Today's rating action results from the announcement that the new
Mexican government that will assume office on December 1st, 2018
will not continue with the construction of the New Mexico City Airport
in Texcoco, State of Mexico.
While the next steps following that decision are unclear to us at this
point in time, the risks of an Event of Default under the Indenture
of the Notes have increased. We also note that as a result of this
decision, the anticipated growth of revenues that would serve the
Notes via the proceeds from the Airport Usage Tariff (TUA) over the next
five years has been sensibly reduced.
Moody's considers that MEXCAT's stand-alone credit
quality, as captured by our Baseline Credit Assessment (BCA) of
ba1, is still supported by solid cash flows generated by the existing
airport's recent passenger growth. Revenues have also been
supported by an extraordinary 24.7% increase in the TUA
(international passengers) that took place in January of 2018.
Total traffic in the current Mexico City airport grew 7.2%
in 2017. As of September 2018, total traffic continues to
grow solidly at 12%. As a result, the reported debt
service coverage for the first six months of 2018 reached 1.5x,
above our original projections of approximately 1.3x.
The rating of MEXCAT reflects the application of Moody's joint default
analysis (JDA) framework for government related issuers. The rating
action reflects the maintenance of a BCA of ba1 as a measure of MEXCAT's
standalone creditworthiness. In addition, we still consider
a high default dependence between MEXCAT and the Government of Mexico
(A3 stable). Moody's has adjusted its assessment of implied
government support from the Government of Mexico to moderate from very
high. Our lower support assumption seeks to capture the undefined
stance that the new government will follow towards a future project.
The change results in a reduction of the rating uplift provided by the
Government of Mexico to MEXCAT from its standalone credit profile to just
one notch from three previously.
The placement of the rating under review for downgrade reflects the uncertainty
surrounding the next decisions that the incoming government will need
to take regarding the new airport concession granted to Grupo Aeroportuario
de la Ciudad de México and their potential implications for note
holders. According to the Notes' Indenture and absent appropriate
remedies, an Event of Default could be triggered, among others,
by an amendment of the existing concession in a way that causes a material
adverse effect on the operations, business, condition (financial
or otherwise) or prospects of the Issuer or the Sponsor. Moody's
notes that the implementation of the incoming government's decision
on the concession may not occur until after December 1st, by which
time, we would anticipate to have access to a comprehensive plan.
During the review period, Moody's expects to have clearer
insight on the government's plans to cancel or amend the existing
concession and assess the implications of such plans under the existing
Indenture, including whether or not they constitute an Event of
Default or have appropriate remedies.
WHAT COULD CHANGE THE RATING UP/DOWN
A rating upgrade in the near term is unlikely. Evidence of support
from the Government of Mexico and a confirmation that an Event of Default
will not occur as a result of the incoming government's actions
could lead to the stabilization of the rating.
A further downgrade will likely result from government´s actions
that trigger an Event of Default without appropriate remedy. Our
assessment of a weaker stand-alone credit profile of MECXAT resulting
from materially lower TUA projections and expected cash generation capacity
over the next five to ten years could also lead to a downgrade.
MEXCAT issued $1 billion 4.250% Senior Secured Notes
due 2026 and $1 billion 5.500% Senior Secured Notes
due 2046. In 2017 MEXCAT issued $1 billion 3.875%
Senior Secured Notes due 2028 and $3 billion 5.500%
Senior Secured Notes due 2047. The Notes are backed by the TUA
from the current Mexico City International Airport and future TUA proceeds
from a planned new international airport that would have been located
in Texcoco, State of Mexico. Grupo Aeroportuario de la Ciudad
de México, a majority government owned company, controls
the concession of the existing airport and the one that will be cancelled.
The methodologies used in these ratings were Privately Managed Airports and Related Issuers published in September 2017, and Government-Related Issuers published in June 2018. 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.
Adrian Garza
Vice President - Senior Analyst
Corporate Finance Group
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
JOURNALISTS: 1 888 779 5833
Client Service: 1 212 553 1653
A.J. Sabatelle
Associate Managing Director
Corporate Finance Group
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