TEXT-S&P affirms Abertis Infraestructuras 'BBB' rating

Thu Oct 18, 2012 9:50am EDT

Overview
     -- On Oct. 10, 2012, we lowered our long- and short-term sovereign credit 
ratings on the Kingdom of Spain to 'BBB-/A-3' from 'BBB+/A-2' on Oct. 10, 
2012, and assigned a negative outlook.
     -- We consider that Spanish transport operator Abertis Infraestructuras 
SA has "high" country risk exposure to Spain; however, we already incorporate 
the company's weak operations in Spain into the rating. 
     -- We are affirming our 'BBB' long-term corporate credit rating on 
Abertis.
     -- The negative outlook reflects our view that the weak economic 
environment in Spain could weigh on the improvement we forecast in Abertis' 
credit metrics and the debt repayment we anticipate, both of which support our 
current rating. It also reflects the risk that we could lower the rating if we 
were to downgrade Spain.

Rating Action
On Oct. 18, 2012, Standard & Poor's Ratings Services affirmed its 'BBB' 
long-term corporate credit rating on Abertis Infraestructuras S.A.. The
outlook is negative. 

Rationale
The affirmation reflects Standard & Poor's expectation that, despite the 
downgrade of Spain, we still expect Abertis' credit metrics to strengthen in 
the near term. As such, we expect adjusted funds from operation (FFO) to debt 
to reach above 12% in 2012 (on a pro forma basis) and gradually increase after 
that, and recourse debt to reduce by at least EUR0.6 billion by Dec. 31, 2013, 
compared to year-end 2011. (See "Spain Ratings Lowered To 'BBB-/A-3' On 
Mounting Economic And Political Risks; Outlook Negative," published Oct. 10, 
2012, on RatingsDirect on the Global Credit Portal.)

According to our criteria for rating an entity in the European Economic and 
Monetary Union above the sovereign, we have assessed Abertis as having "high" 
exposure to domestic country risks, based on: 
     -- The transport infrastructure sector's "high" sensitivity to country 
risk; and 
     -- Abertis' still material exposure of its asset base and earnings to 
Spain despite the increasing internationalization of its portfolio. We 
estimate that Spain will represent about 40% of EBITDA in 2013, taking into 
account the acquisition of OHL Brasil (not rated), compared to more than 50% 
in 2011.

Under our criteria, the maximum rating differential between the sovereign and 
our long-term corporate credit rating on an issuer that we consider to have 
"high" exposure to domestic country risks is two notches if the sovereign is 
rated 'BBB-' or above; one notch if the sovereign is rated between 'BB+' and 
'B'; and capped at 'B+' if the sovereign rating is 'B-' or lower.

We currently rate Abertis one notch higher than Spain. This reflects our view 
of the good resilience of Abertis' corporate performance to date. The rating 
on Abertis is underpinned by our assessment of the group's "strong" business 
risk profile and of its "significant" financial risk profile.

The rating is supported by Abertis' portfolio of toll road concessions, mostly 
located in Spain and France, which makes it the third-largest toll road 
network operator in Europe by network length. Although the company is exposed 
to traffic risk, it benefits from strong profitability and stable cash flows 
generated by the 3,747-kilometer network of toll roads it operates under 
long-term agreements. Network traffic is mature and capital expenditure 
(capex) needs are fairly manageable, in our view. 

Traffic volumes on Abertis' Spanish toll roads has seen significant declines 
in the last four years--average daily traffic declined by 29% between 2007 and 
the first half of 2012 (on a like-for-like basis). We forecast that traffic on 
Abertis' Spanish toll roads will contract by 10% for the full year 2012, 
compared to -6.5% the previous year, with a milder decline in traffic volumes 
likely the following year. 

Our assessment of Abertis' "strong" business risk profile is supported by the 
resilience of its earnings--increases in tariffs and cost efficiencies 
partially offset the impact of declines in traffic volumes, which resulted in 
EBITDA declining by 16% between the first half of 2007 and the first half of 
2012 (on a like-for-like basis)--and by the diversification of the group's 
operations.

Abertis' "significant" financial risk profile is supported by the asset 
disposals made by the group in 2012, which include the sale of 23% in 
France-based satellite operator Eutelsat Communications S.A. (Eutelsat; 
BBB/Stable/A-2) and of a 15% stake in Portuguese toll-road operator Brisa (not 
rated). These transactions have given rise to sizable proceeds, which we 
expect will be partially used to repay debt due within the next 18 months. 

Our assessment of Abertis' financial risk profile also incorporates the 
acquisition of a controlling stake in the Brazilian toll roads of Obrascon 
Huarte Lain (not rated). We anticipate that, as a result of the acquisition, 
Abertis' reported net debt at year-end 2012 will increase by about EUR1.3 
billion. We forecast that, in 2013, the acquisition will add about EUR500 
million to consolidated EBITDA. We also forecast that the impact on 
consolidated credit metrics will, all other things being equal, be slightly 
positive from 2013. 

Our base-case scenario does not incorporate any other acquisitions. We 
understand that the acquisition by Abertis of OHL's toll roads in Chile is 
still being considered by the company, although a binding agreement has not 
yet been reached. 

Liquidity
We view Abertis' liquidity position as "strong" under our criteria. We 
estimate that sources of liquidity for the 12 months to June 30, 2013, will 
cover uses of liquidity by more than 2x, and that coverage will remain in 
excess of 1x the following year. 

We estimate liquidity sources in the 12 months to June 30, 2013, of more than 
EUR5.6 billion. These include:
     -- Unrestricted cash and short-term liquid investments of EUR0.9 billion as
of June 30, 2012;
     -- EUR750 million 4.75% notes due in October 2019;
     -- Proceeds from asset disposals of about EUR0.3 billion, thanks to the 
disposal of Abertis' stake in Brisa and of some of its treasury shares to 
Brookfield. We also anticipate that Abertis could sell more of its treasury 
shares to Brookfield, although the exact amount is not determined at this 
stage, and hence this is not included in our liquidity calculations; 
     -- Funds from operations of about EUR1.6 billion over the period; and
     -- About EUR2.1 billion available under bank lines which expire after June 
30, 2013. Abertis also has EUR290 million available under bank lines which 
mature within the coming year. Given their short duration, these facilities 
are not included in our liquidity calculations.

We anticipate that Abertis' liquidity needs will be about EUR2.4 billion over 
the period, comprising:
     -- Debt repayment of about EUR0.6 billion; 
     -- Capital spending, acquisitions, and dividend payments of about EUR1.4 
billion; and
     -- About EUR350 million credit puts that could be triggered by a downgrade 
of Abertis by up to three notches.

In 2013, debt maturities will be about EUR1.5 billion, of which about one-third 
are at Abertis' subsidiaries. Abertis has already partially refinanced one of 
its 2013 maturities, through a EUR561 million bank loan which will partially 
extend a EUR900 million syndicated loan to July 2015 from July 2013.

Abertis expects to maintain adequate headroom under its financial covenants, 
which are mainly at its French subsidiary Sanef. Following repayment of loans 
maturing in 2013, the financing of Sanef's parent company, Holding 
d'Infrastructures de Transport (HIT; not rated), no longer includes any 
financial covenants.

Outlook
The negative outlook reflects the risk that the weak economic environment in 
Europe could limit the improvement we forecast in Abertis' credit metrics and 
the repayment we anticipate of its recourse debt, both of which support our 
'BBB' rating on Abertis. Our forecast ratios are at the low end of what we 
consider as commensurate with the current rating, providing limited headroom 
for underperformance. In our view, traffic volumes on Abertis' toll roads 
could potentially be affected by increases in fuel prices and the recent 
decision by the Spanish government to increase taxes. 

The negative outlook also reflects the risk that, under our criteria for 
rating an entity in the eurozone above the sovereign, we could lower our 
rating on Abertis if we downgrade Spain. This is because, assuming no change 
to Abertis' "high" exposure to domestic country risks, the maximum rating 
differential with the sovereign would be one notch if the sovereign is rated 
between 'BB+' and 'B'.

We could lower the rating if FFO to debt is less than 12%, or if the gradual 
repayment of the group's debt is slower than we anticipate. This could occur, 
for example, if the weak economic environment constrains Abertis' cash flows. 
The adoption of a more aggressive financial policy could also put pressure on 
the rating, as could deterioration in the group's operating environment and/or 
an increase in country risk, for example due to deterioration in the 
macroeconomic and sovereign environment.

Conversely, we could revise the outlook to stable if FFO to debt improves to 
more than 12%, and if the group reduces recourse debt as we anticipate. An 
outlook revision to stable would be consistent, in our view, with a more 
stable macroeconomic and sovereign environment, unless Abertis creates 
significant headroom in terms of credit metrics and debt repayment.

Related Criteria And Research
Related Criteria
     -- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
     -- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
     -- Nonsovereign Ratings That Exceed EMU Sovereign Ratings: Methodology 
And Assumptions, June 14, 2011
     -- Principles Of Credit Ratings, Feb. 16, 2011
     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
     -- 2008 Corporate Criteria: Ratios And Adjustments, April 15, 2008
     -- 2008 Corporate Criteria: Rating Each Issue, April 15, 2008
     -- Parent/Subsidiary Links; General Principles; Subsidiaries/Joint 
Ventures/Nonrecourse Projects; Finance Subsidiaries; Rating Link to Parent, 
Oct. 28, 2004

Related Research
     -- Spain Ratings Lowered To 'BBB-/A-3' On Mounting Economic And Political 
Risks; Outlook Negative, Oct. 10, 2012
     -- Toll Facilities' Credit Quality Is Holding Steady Globally Despite 
Bumps In The Road, Oct. 4, 2012
     -- Country Risks, A Weak Economic Climate, And M&A Activity Test 
Resilience Of European Toll Road Network Operators, July 12, 2012


Ratings List
Ratings Affirmed

Abertis Infraestructuras S.A.
 Corporate Credit Rating                BBB/Negative/--    
 Senior Unsecured                       BBB                



Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.
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