(The following statement was released by the rating agency)
BARCELONA/PARIS/LONDON, March 26 (Fitch) Fitch Ratings has
assigned ADIF - Alta
Velocidad (ADIF AV) Long-term foreign and local currency Issuer
(IDR) of 'BBB' and Short-term foreign and local currency IDRs of
Outlook on the Long-term IDRs is Stable.
ADIF AV was created at end-December 2013 through Royal Decree
the segregation of the previous ADIF (rated BBB/F2/Stable) into
entities (See 'Fitch: ADIF Split Neutral on Credit Profile'
December 2013). The existing ADIF remains responsible for the
network in Spain and receives state subsidies, while ADIF AV is
the maintenance and expansion of the high speed rail network and
from railway operators.
ADIF AV's ratings are equalised with those of Spain's
reflecting the entity's public sector legal status and strong
strategic ties with the government. As a result, there is a high
extraordinary government support, if needed. ADIF AV is
therefore classified as
a dependent public sector entity under Fitch's criteria.
KEY RATING DRIVERS
Special Legal Status
ADIF AV was created as a public entity corporation, reporting
directly to the
Ministry of Public Works. The state appoints members of the
entity's Board of
Directors and its President. While ADIF AV does not have an
from the state, it cannot go bankrupt and, if dissolved, its
liabilities would revert to the state. ADIF AV also cannot be
a change in its legal status.
Tight Control by Government
ADIF AV's budget, including debt, is approved by the Spanish
parliament at the
same time as the central government's budget is tabled. In
addition, all debt
contracted with non-Spanish residents or bond issuance requires
authorisation by the treasury. The state-appointed auditor also
accounts of ADIF AV.
Funding from Central Government
The Ministry of Public Works has mandated ADIF AV a large
investment plan as it
expands the high speed rail infrastructure in Spain. Presently
the high speed
network covers around 3,000 km and a further 2,000 km are in the
and planning stage. Capital expenditure for 2014-2018 is
projected to amount to
EUR11.9bn, 55% of which is to be funded by debt.
Weak Financial Profile
Although ADIF AV is projected to incur losses in the near term
from a large
depreciation charge, it is forecast to have positive EBIDTA
27%, for the 2014-2018 period. Overall deficit will be partly
state capital injections projected at EUR3.5bn for the 2014-2018
Stabilising Debt Levels
ADIF AV was transferred EUR11.6bn in debt after creation,
representing 95% of
the total debt of the original ADIF. Seventy-five per cent of
the debt is with
European Investment Bank. Although there are some significant
debt repayments in
2014, ADIF AV expects to refinance this and is looking at
including a bond issue. Despite an ambitious capital expenditure
growth will be moderate as part of the capital expenditure will
be co-funded by
EU funds. Debt is projected to increase to EUR15.5bn by
Rating changes to the sovereign will be reflected in ADIF AV.
A downgrade could also follow if there is a change in the status
of ADIF AV or
in Fitch's assessment of extraordinary support from the state.
In addition, a
downgrade could result if there is insufficient funding from the
state by way of
capital injections or subsidies, resulting in a depletion of
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Paseo de Gracia, 85
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Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530
Additional information is available at www.fitchratings.com.
Applicable criteria 'Tax-Supported Rating Criteria' dated 14
August 2012 and
'Rating of Public Sector Entities Outside the United States'
dated 4 march 2014,
are available at www.fitchratings.com.
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
Rating of Public Sector Entities - Outside the United States
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