TEXT-Fitch affirms Vinci SA at 'BBB+', outlook is stable

Thu Nov 29, 2012 10:13am EST

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Nov 29 - Fitch Ratings has affirmed Vinci S.A.'s (Vinci) Long-term Issuer
Default Rating (IDR) and senior unsecured rating at 'BBB+'. The subordinated
hybrid notes have been affirmed at 'BBB-'. The Outlook is Stable.

Despite a more challenging French construction market, Fitch expects Vinci's
credit profile to be largely unaffected, supported by a net cash position at the
parent level. Favourable domestic market characteristics with few large
competitors protect its market position. Fitch expects slower order book growth
in the medium term, to some extent driven by margin preservation.
Diversification into higher value sub-sectors and gradual expansion into
international markets should offset a weaker domestic civil engineering outlook.
The mature regulated concessions continue to provide a stable dividend stream to
the parent providing financial flexibility to fund a strategy of bolt-on
acquisitions.

KEY DRIVERS
- Downside Risk in Construction:
Mild tightening in margins, particularly stemming from Vinci's road construction
business, indicates current market challenges even though recent trading results
show low revenue growth in the construction business. Fitch believes Vinci is
better placed than its domestic rivals (Eiffage and Bouygues), with a stronger
emphasis on the higher-value sub-sectors of electrical engineering and complex
infrastructure projects compared with commercial buildings and road
construction.

- International Order Book Growth:
Vinci's dominance in France continues, with around 60% of revenue from the
domestic market. Austerity measures in France are likely to affect construction
output in the medium term, and Fitch views positively the company's greater
emphasis on growth markets. During Q312, the order book for France grew by 2%
compared with 15% in international markets.

- Concessions Ring-Fenced:
Concessions are non-recourse funded, which implies ring-fencing of debt between
Vinci and its infrastructure subsidiaries. Consequently, Fitch rates Vinci on a
deconsolidated basis and the agency's analysis focuses on the recourse
contracting business. Dividends up-streamed to the parent company are also
reflected in the ratings.

- Resilient Diversification into Concessions:
Vinci is supported by an integrated model, with stable cash flow generation from
concessions complementing the more traditionally volatile construction business.
Its mature toll roads continue to generate solid free cash flow and support
up-streaming of dividends. These assets benefit from a stable tariff framework
and Fitch considers them positive compared with peers.

RATING SENSITIVITY GUIDANCE
- M&A and High Capex:
A sustained increase in the company's leverage on a recourse basis (including
net debt to EBITDAR plus dividends above 1.0x), perhaps due to a debt-funded
acquisitions or higher-than-expected capex, would put negative pressure on the
ratings.

- Lower Dividends from Concessions:
A substantial decline in dividends from the concession business resulting from
significantly weaker performance or a re-leveraging of assets would be rating
negative. However, Fitch does not expect this in light of recent performance and
the company's prospects.

- Working-Capital Management:
Deterioration in working-capital dynamics, including a reversal in prepayments
from the contracting business, could erode cash flow from operations at the
recourse level.

LIQUIDITY & DEBT STRUCTURE
- Strong Liquidity:
At end-Q312 Vinci's liquidity position (taking into account all holding and
operating entities) was comfortable, with around EUR10.9bn available. This
comprised EUR4.4bn cash and EUR6.5bn undrawn committed medium-term credit
facilities.

- Increased Bond Issuance:
In December 2011 Vinci raised EUR750m 4.125% bonds due 2017, followed in March
2012 by EUR750m 3.375% bonds due 2020, both at the parent level.


Additional information is available on www.fitchratings.com. For regulatory
purposes in various jurisdictions, the supervisory analyst named above is deemed
to be the primary analyst for this issuer; the principal analyst is deemed to be
the secondary.

The ratings above were unsolicited and have been provided by Fitch as a service
to investors.

Applicable criteria, 'Corporate Rating Methodology', dated 12 August 2012, and
'Treatment and Notching of Hybrids in Non-Financial Corporate and REIT Credit
Analysis', dated 15 December 2011 is available at www.fitchratings.com.

Applicable Criteria and Related Research:
Corporate Rating Methodology
Treatment and Notching of Hybrids in Nonfinancial Corporate and REIT Credit
Analysis
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