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Rating Action:

Moody's downgrades Mexico City Airport to Baa3 from Baa1; places the rating under review for further downgrade

29 Oct 2018

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

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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