(The following statement was released by the rating agency)
Oct 01 - Fitch Ratings has assigned French Toll Roads operator Societe Autoroutes Paris-Rhin-Rhone S.A. (APRR) a senior unsecured rating of ‘BBB+’ with a Stable Outlook (which applies to the EUR6bn Euro Medium-Term Notes programme and the notes already issued under the programme), a Long-term Issuer Default Rating (IDR) of ‘BBB+’ with Stable Outlook and a Short-Term IDR of F2.
Due to the Holdco/Opco structure, with debt at both levels (27% at Holdco and 73% at Opco) Fitch used its Parent-Subsidiary Rating Linkage methodology. The agency has consequently assessed the consolidated financial profile of APRR and Eiffarie and notched APRR’s IDR above its weaker parent. APRR does not guarantee its parent’s debt but neither is APRR totally ring-fenced from its parent. Some protection is afforded by APRR’s dividend restrictions (a covenant with considerable headroom, and dividend payments restricted to accumulated profits under French law). Eiffarie is ultimately owned by Eiffage S.A. and several infrastructure funds managed by Macquarie.
The consolidated entity’s IDR (assuming all Eiffarie’s debt is held at APRR’s level and ranks pari passu to APRR’s current debt) was deemed to be ‘BBB’. This rating combines a strong asset profile and a weaker debt structure because it includes the exposure to Eiffarie’s refinancing risk.
Fitch assessed this entity against the traditional key rating factors as per its Toll Roads criteria. Compared to most assets in Fitch’s infrastructure portfolio, APRR has a large and diversified network (2,263km). The traffic has been resilient through the crisis (peak to trough during the 2008-2010 crisis was a -1.2% decline), in particular because of the strategic location of the network between Paris, Lyon (France’s two main economic centres) and the Alps, as well a diversified client and seasonal mix (commercial, commuter and tourist). This attribute is thus Stronger.
Revenue - price risk is typical of major European networks, with tariffs tracking (and capped by) a large fraction of inflation. This gives a Midrange Attribute.
The network is in good condition and the maintenance programme is consistent with the Concession contract requirements. The company has strong experience in managing its asset base. Fitch considers this a Stronger Attribute.
APRR’s debt is typical of a large corporate. The non-amortising nature of the debt and lack of material structural protection are weaker features. However, this is adequately mitigated by the regulatory/contractual framework of its concessions, a moderate exposure to refinancing risk thanks to a well-diversified range of bullet maturities and a demonstrated good access to bond markets, with a proactive debt management. Nonetheless, once Eiffarie’s debt is taken into account, there is an additional element of fragility due to the lumpy refinancing risk in February 2017. A Weaker attribute would be adequate for the consolidated entity. Once the legal protection and seniority of APRR’s debt is considered, the attribute is changed to Midrange. This is reflected in the one-notch uplift.
The consolidated entity would feature a 1.3x synthetic ADSCR (15-year annuity, compatible with the 20-year concession maturity) and a 7.1x net debt/EBITDA in 2011, progressively down to 5.3x in 2016 in Fitch’s rating case. This deleveraging is not optional, but is the result of the compulsory (covenanted) cash sweep at Eiffarie’s level. Such metrics suggest a Midrange Attribute.
Fitch’s guidance for Toll Roads suggests a DSCR of 1.0x to 1.3x is reflective of a ‘BBB’ category credit, in the case of an asset with established operating history (ie demonstrated resilience). With attributes either in Stronger or Midrange categories on the key rating factors, except Weaker for debt structure, and a synthetic DSCR of 1.30x in rating case, the ‘BBB’ proforma rating for the combined APRR/Eiffarie entity is consistent with criteria.