(Repeat for additional subscribers)
July 7 (The following statement was released by the rating agency)
Fitch Ratings says in a newly-published report that its
outlook for Australian transportation infrastructure is stable, supported
primarily by continued traffic growth. However, exposure to medium-term bullet
debt could leave issuers vulnerable to refinancing risk in the event of a
significant downturn in the Australian economy or banking sector.
Underlying traffic levels have remained generally robust in 2014 continuing the
trend of recent years. Sydney Airport's May year-to-date traffic grew 2.5% over
the prior year, somewhat lower than growth over the same period in 2013. Fitch
expects strong overall traffic growth in its rated Australian road portfolio to
continue through 2H 2014 following the completion of expansion works.
The performance of the road and airport assets in Fitch's Australian portfolio
are underpinned by their important economic roles: Sydney Airport is the
principal origin and destination airport in Australia; the Eastern Distributor,
Hills M2, M5 and Westlink M7 roads along with the Cross City Tunnel and the Lane
Cove Tunnel form the bulk of Sydney's orbital road network; and the Citylink
road in Melbourne is an important connection into the city's central business
district. Robust traffic performance, combined with supportive pricing
arrangements, has provided these companies with strong cash flow coverage.
Nonetheless, Australian transportation issuers have unusually high exposure to
medium-term (three to five-year) domestic bullet bank debt compared with global
peers. While cash flows should be able to support potentially higher debt costs
in the future, the need for regular refinancing of these long life assets is a
weakness relative to global peers and exposes these companies to the liquidity
of the Australian banking sector.
Furthermore, the Australian economy has a high dependence on the commodities
sector and its banking sector is heavily reliant on external debt funding.
Should either of these sectors deteriorate substantially, this could leave the
Australian transportation issuers exposed to reduced traffic levels or to
difficulties refinancing maturing debt.
The report, 2014 Mid-Year Outlook: Australian Transportation, is available on
www.fitchratings.com or by clicking on the link below.
Link to Fitch Ratings' Report: 2014 Mid-Year Outlook: Australian Transportation