RPT-Correct: Fitch affirms APRR at 'BBB+'; outlook stable

Thu Sep 26, 2013 5:41am EDT

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Sept 26 (Reuters) - (The following statement was released by the rating agency)

This announcement corrects the version published on 25th September 2013, which incorrectly stated the downgrade leverage trigger.

Fitch Ratings has affirmed Autoroute Paris-Rhin-Rhone's (APRR) Long-term and Short-term senior unsecured ratings at 'BBB+' and 'F2' respectively. The agency has also affirmed APRR's Long-term Issuer Default Rating (IDR) at 'BBB+' and the Short-term IDR at 'F2', with Stable Outlooks.


The affirmation reflects the fact that APRR's performance in 2012 and updated forecasts are in line with Fitch's expectations, with the main financial metric (net debt/Ebitda) stabilising at around 4.5x. The consolidated credit profile of APRR and its parent Eiffarie is rated at 'BBB'. The rating combines a strong asset profile but a weaker debt structure because it includes the exposure toEiffarie's refinancing risk. APRR's Long-Term IDR itself is one notch higher in light of the legal protection to, and seniority of, APRR's debt.

The 'BBB+' rating of APRR's senior unsecured debt results from a strong asset profile and amid-range financial structure.

Revenue - Volume Risk- Stronger

APRR is a large and diversified network (approximately 2,300km) which demonstrated very resilient traffic performance through the crisis (peak to trough was a 1.9% decline), in particular because of the strategic location of the network between Paris and Lyon (France's two main economic centres) as well a diversified client mix (commercial, commuter and tourist).

Revenue - Price Risk - Midrange

APRR typically recovers capex investments through CPI-linked tariff increases. In addition to this, it demonstrated its capacity to recover against unforeseen unilateral tax hikes imposed on tolls, which it managed to recover through one-off upticks in its tariff indexation mechanism.

Infrastructure Development/Renewal - Stronger

Network maintenance is large scale but generally of low complexity. Debt Structure - Midrange

The non-amortising nature of APRR's debt and the lack of material structural protections are weaker features. However this is adequately mitigated by significant standby liquidity,demonstrated access to bond markets and a proactive and prudent debt management strategy.

Debt Service and Counterparty Risk - Midrange

Leverage (the main credit metric for an issuer that has bullet debt) stood at 4.7x (net debt /Ebitda) at YE12 as calculated by Fitch. APRR has been able to keep around the 5x level during five years of adverse economic development, a sign of strong resilience. Leverage under Fitch's rating case is expected to decrease moderately over the coming years (Fitch calculations). The synthetic annual debt service coverage ratio (ADSCR; 15-year annuity) in Fitch's rating case is 1.7x which demonstrates the capacity to comfortably retire debt. A full consolidation case (taking Eiffarie's debt), would lead to a 1.3x DSCR and a 5.3x net debt /Ebitda in 2016. The deleveraging at the consolidated group level is not optional, but the result of the compulsory (covenanted) cash sweep at Eiffarie's level.


The main peers for APRR are Atlantia ('A-'/Negative), Abertis ('BBB+'/Negative) and to a lesser extent Brisa ('BBB'/Negative) and Vinci ('BBB+'/Stable). APRR has proved much more resilient than all peers, in particular Abertis, which however maintained its rating thanks to asset sales (net debt/Ebitda of 4x). Brisa suffers from adverse economic development and exposure to vulnerable Portuguese banks, while Vinci is constrained by the volatility of its construction business.


Austerity knock-on effects:

Austerity-related decisions made by the French Government, such as changes in taxation, could be adverse to infrastructure concessionaires and weigh on the rating.

Debt push down:

Beyond its own debt, APRR has to service Eiffarie's debt through its dividends. An aggressive strategy of pushing down debt from Eiffarie to APRR through extraordinary dividends (although we estimate this is unlikely for strategic and legal reasons) could lower the rating.

Exposure to macro downside risk:

The Stable Outlook reflects the headroom that APRR still keeps against the downgrade leverage trigger of 6x. A marked and durable degradation of the French economy could derail APRR's solid record of resilience. Evidence of recessionary prospects over a prolonged horizon (two years) could prompt a Negative Outlook. APRR is a French-based infrastructure group and one of the largest toll road operators in Europe. Its activities are exclusively focused on its core network ranging along the North-Western axis of France. Its rating is constrained by its OpCo-HoldCo structure as APRR's (OpCo) rating cannot entirely disregard the debt held at Eiffarie (HoldCo) as there is a risk that Eiffarie debt could be pushed down to APRR.

In rating APRR, Fitch applies its corporate-based Parent-Subsidiary Rating Linkage methodology to assess the strength and the nature of the OpCo-HoldCo relationship to determine a rating of the notional Consolidated Credit Profile i.e. aggregating all debt and all effective cash flows (on a pari passu basis) to determine key rating drivers and metrics at a group level (in turn assessed under infrastructure and toll road-specific criteria).

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