TEXT-S&P revises Autopista Monterrey Cadereyta outlook to stable from negative

Mon Nov 26, 2012 4:26pm EST

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Overview
     -- Autopista Monterrey Cadereyta's traffic volume has shown a recovery 
trend after repairs of hurricane-related damages were finished during the 
first half of 2012.
     -- We are revising our rating outlook on AMC's MXN2.25 billion senior 
secured notes to stable from negative. At the same time, we are affirming our 
'BBB-' global scale and 'mxAA' national scale ratings on the notes. 
     -- The stable outlook reflects AMC's adequate financial flexibility and 
positive trend in traffic volume, which will strengthen its operating 
performance during the next two to three years. 

Rating Action
On Nov. 26, 2012, Standard & Poor's Ratings Services revised its rating 
outlook on Mexican toll road Autopista Monterrey-Cadereyta's (AMC) Mexican 
peso (MXN) 2.25 billion senior secured notes, issued by trust 80425, to stable 
from negative. At the same time, we affirmed our 'BBB-' global scale and 
'mxAA' national scale ratings on the notes. 

The outlook revision reflects the positive trend of the toll road's traffic 
volume after all hurricane-related repairs were completed in the first half of 
2012. In addition, the local and federal governments have been actively 
participating in several programs to reinforce the security in the Mexican 
state of Nuevo Leon, which has positively affected the toll road's traffic 
volume. Furthermore, the major maintenance reserve is again fully funded, 
increasing AMC's financial flexibility to face unexpected contingencies.

MBIA Insurance Corp. (B/Negative/--) provides an unconditional and irrevocable 
guarantee of the full payment of principal and interest on the senior secured 
notes. Given that the Standard & Poor's underlying rating (SPUR) on AMC's 
senior secured notes is higher than the issuer credit rating on MBIA, the 
ratings on the notes reflect the SPUR.

Rationale
The ratings on the senior secured notes reflect the toll road's zero-cash-flow 
structure, in which excess cash after scheduled obligations is used to prepay 
principal; a projected average debt service coverage ratio (DSCR) of 1.61x; 
the trust's bankruptcy-remote structure; and the inelasticity that 
characterizes most of the toll road's users, given its status as a commuter 
road. The factors that constrain the ratings are the toll road's vulnerability 
to economic cycles and exposure to security issues in the region; the 
higher-than-average tariff per kilometer, which limits the toll road's ability 
to capture additional market share; and significant competition from the 
alternative free road to Monterrey's airport.

AMC is a 30-kilometer toll road located in the state of Nuevo Leon and 
connects the cities of Monterrey and Cadereyta. Red Estatal de Autopistas de 
Nuevo Leon (REA; not rated) owns and maintains the road. REA is a 
decentralized public entity with more than 20 years of experience operating 
toll roads and other public infrastructure.

Traffic volume on the toll road has shown a positive trend after all 
hurricane-related reconstruction works were completed. The positive trend also 
reflect, in our view, the security programs that the local and federal 
governments have established to reduce the security issues that began to hurt 
traffic volume at the start of the second half of 2011. 

For the 12 months ended Oct. 31, 2012, AMC's traffic volume increased 4.0%, 
and revenues increased 10.3%, benefiting from the tariff adjustments made on 
Feb. 15, 2012. We believe that AMC's traffic volume will continue to post a 
positive trend, supported by the region's economic growth and the improvement 
in security issues. Our base case scenario considers an average increase in 
traffic volume of 3.7% throughout the remaining life of the notes. This 
includes a moderate recovery in traffic volume related to security and tariff 
adjustments at the beginning of each year based on inflation. 

The senior notes are denominated in inflation-protected units (UDIs), creating 
a currency mismatch with revenues generated in pesos. We believe that this 
risk is partly mitigated as the sponsor, REA, has the right to adjust tariffs 
every year in line with annual inflation levels until the project repays the 
full amount of the debt. If inflation increases by more than 5% during a 
12-month period, the tariffs can be adjusted again. However, we believe that, 
under a high-inflation scenario, REA wouldn't be able to increase tariffs by 
the full amount of inflation increase. 

Following the recovery operating performance, the trust was able to again 
fully fund the major maintenance reserve, increasing its ability to face 
another unexpected hurricane-related contingency or any security-related 
events. 

The next significant major maintenance is schedule for 2016, with an 
investment of MXN$62 million, according to independent engineer. Therefore, we 
expect that the trust will use available cash flow after debt service to 
prepay debt. The trust paid its 15th coupon on June 18, 2012, totaling MXN$91 
million, including interest and principal, and it has not made any prepayments 
since June 2010. Considering the trust's legal waterfall, the last coupon 
payment DSCR was 1.41x, which compares adequately with its peers in the same 
rating category. The next coupon payment is scheduled for Dec. 16, 2012, and 
we estimate an average DSCR of 1.61x with a minimum of 1.26x, for the 
remaining life of the issuance. Under our base case scenario, we expect the 
trust to make a prepayment on the next coupon of about MXN20 million and to 
continue doing so in order to fully amortize the debt in June 2024--5.5 years 
before its programmed schedule maturity.

Liquidity
We consider AMC's liquidity to be sound. We believe that AMC's cash flow 
remains adequate and will allow expected average DSCR's of 1.61x throughout 
the remaining life of the notes. The toll road's financial structure includes 
a debt service reserve for any liquidity pressure that was funded upfront with 
issuance proceeds, and it amounts 12 months of debt service payments (interest 
and capital). As of Sept. 30, 2012, the balance of the debt service reserve 
account was MXN196.7 million plus an additional MXN8.4 million in a separate 
account funded with the issuance proceeds. 

Outlook
The stable outlook reflects AMC's adequate financial flexibility and positive 
trend in traffic volume, which will strengthen its operating performance 
during the next two to three years. We could raise the ratings if 
higher-than-expected traffic volume and, therefore, toll revenues result in 
DSCRs above our average of 1.61x. We could lower the ratings if the toll 
road's traffic volume doesn't totally recover according to our expectations, 
leading to DSCRs consistently below our base case average, which would 
diminished AMC's financial flexibility. 

Related Criteria And Research
     -- Project Finance Construction And Operations Counterparty Methodology, 
Dec. 20, 2011
     -- Updated Project Finance Summary Debt Rating Criteria, Sept. 18, 2007

Ratings List
Ratings Affirmed/Outlook Action
Fideicomiso 80425 (Monterrey - Cadereyta)

Senior Secured                 To                         From
   Global Scale                BBB-/Stable/--             BBB-/Negative/--
   National Scale              mxAA/Stable/--             mxAA/Negative/-- 
   SPUR                        BBB-/Stable/--             BBB-/Negative/--
 
SPUR--Standard & Poor's underlying rating.

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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