-- 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.
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.
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
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.
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.
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 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