SANTIAGO, Chile - (Business Wire) Fitch Ratings today downgraded the bonds issued by Autopista del Maipo Sociedad Concesionaria S.A. (AdM) and insured by MBIA Insurance Corp (MBIA) to 'BBB(chl)' from 'AAA(chl)'. At the same time, Fitch has removed the ratings from Rating Watch Negative. The Rating Outlook is Stable. The rating action relates to the following issues:
--Bond program 382, maturing Dec. 31, 2034;
--Bond Series A (BAMAI-A1, BAMAI-A2), maturing June 15, 2025;
--Bond Series B (BAMAI-B1, BAMAI-B2), maturing Dec. 15, 2030.
The downgrade has resulted from the rating action on June 26, 2008 by Fitch withdrawing the Insurer Financial Strength ratings for MBIA, which affected the local ratings for AdM, factoring in only the underlying risk of the project and not its guarantee.
The underlying risk considers a financial structure that is not fully in line with the variable nature of the concession. In spite of the presence of a Revenues Distribution Mechanism (Mecanismo de Distribucion de Ingresos - MDI), which provides flexibility to the concessionaire in pessimistic traffic scenarios, allowing to extend the concession for a number of years that are enough to reach a determined Revenue Present Value and the possibility to increase tolls over inflation levels; this variable nature does not provide, in Fitch's opinion, enough of a liquidity structure to face periods when the project requires additional cash.
All of the above is due to the fact that now that the 'AAA' rating for MBIA was withdrawn, ABN AMRO has the option to not renew the credit facility which provided liquidity to the project, leaving AdM without this safeguard from 2014. On the other hand, according to the structure, there is the possibility to issue insured debt for MBIA up to the maximum this company allows in the financial contracts; the change in market conditions for the past 12 months for the insured bonds, however, could make the project more dependent on other financing sources, to safeguard it against stress events.
Thus, financing sources to face the eventual lack of cash have been reduced, leaving AdM with the need to have liquid cash resources to face pessimistic scenarios. According to the aforementioned, even though MBIA mandates the concessionaire to have reserved cash for UF300,000 until 2012, it also provides the possibility to distribute dividends for an accrued amount of up to UF1.9 million from 2008, which is expected to be carried out in 2012. In Fitch's opinion, the scarce reserved cash the project would have to face 2013 and on with no credit facility (matures in 2014) in base scenarios negatively affects the financial profile for AdM. As an example, the Fitch Base Case presents reserved cash for the 2013-2016 fluctuating at about 12% and 17% for debt service that year, which is considered low for a base scenario.
Hence, in Fitch's opinion, the project is exposed to liquidity risk from 2013, when, depending on the analyzed scenario, AdM could not accumulate enough resources to sustain a limited credit profile. This, factoring in the eventual maturity of the credit facility in 2014.
As long as AdM manages to reduce this risk, be it by accumulating more cash or incorporating a liquidity line during the life of the concession, the financial profile would improve; this scenario is supported by the leverage level of AdM, which would allow the eventual structuring to finance the remaining of the concession, i.e., approximately 12 years.
For the last 12 months as of May 2008, Annual Daily Average Traffic (ADAT) equivalent grew approximately 6% in respect to the same period 2007, with a lower share for trucks, which have increased close to 4.7% in the same period. As per the current construction work for Acceso Sur, they are 84% completed, and are expected to be operational in 2010, with associated revenues of approximately 15% of the total for AdM. Overrun costs due to design changes and delays have been assumed by the Public Works Ministry (Ministerio de Obras Publicas - MOP) and the construction company (Ferrovial), not affecting global revenues for the concessionaire due to the MDI.
Cintra, as owner of AdM, provides experience from the operation of 906 km of roads in Chile and 2,841 all over the world. Also, the company's assets lower the risk stemming from a flawed toll management.
AdM is a society governed by the laws of the Republic of Chile, constituted to develop the International Concession Ruta 5 Tramo Santiago-Talca and Acceso Sur a Santiago under a BOT scheme. The Ruta 5 tranche corresponds to the road with the highest traffic levels in Chile (approximately 70,208 vehicles ADAT equivalent) which connects the main agricultural centers in the country to Santiago, and the main ports in the country. On the other hand, Acceso Sur, represents to a new alternative for vehicles going southbound. The concession started operations in June 1998 and it is expected, given its variable nature, that it will finish around 2040. Capitalization is approximately US$1,270 million, of which 76% corresponds to financial debt.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings
Cristian Fuenzalida, 2-4993313, Santiago
Alberto Santos, 212-908-0714, New York
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