KBRA Assigns BBB- Rating to Autopistas Metropolitanas de Puerto Rico, LLC’s 6.75% Senior Secured Notes Due 2035
NEW YORK--(BUSINESS WIRE)--Nov 26, 2018--Kroll Bond Rating Agency (KBRA) assigns a BBB- rating to the 6.75% Senior Secured Notes Due 2035 (the “Notes”) issued in 2013 by Autopistas Metropolitanas de Puerto Rico, LLC (“Metropistas”) for an original principal amount of $435 million. As of September 2018, Metropistas had $416.73 million outstanding on the Notes. The Outlook is Stable.
In addition to the Notes, Metropistas has also borrowed a term loan due December 2022 with $300.3 million outstanding (together, the “Credit Facilities”). The Credit Facilities are pari passu and cross-collateralized by the same collateral—namely, the memberships interests in, and all assets of, Metropistas (in particular, the rights of Metropistas under the Toll Road Concession Agreement dated as of June 27, 2011 (the “Concession Agreement”) with the Puerto Rico Highway Transportation Authority (PRHTA)). Metropistas is owned by Abertis Infraestructuras, S.A. (Abertis) and GS Infrastructure Partners (GSIP).
The Metropistas concession consists of two sections of highway – PR-22 and PR-5 (the “Project”). The roads have been in operation and tolled since 1972 when the Buchanan toll plaza was opened. Since then, an additional six toll plazas have been added giving a total of six toll plazas on PR-22 and one toll plaza on PR-5. Users pay a fixed toll at each toll plaza as they drive through. PR-22 runs along the north coast of the island connecting the west to San Juan. PR-5 is a short road on the south-west side of San Juan.
The BBB- rating on the Notes reflects our view of the Project’s strengths, as follows:Strong Project Rationale: The Project provides significant time savings to users due to the poor quality of alternative roads. Speed on alternative roads is about half of that on the Project. The price per mile of the Project is under 20 cents for both roads which compares positively with other roads in Puerto Rico and elsewhere in the U.S. Concession Agreement Features: The Concession Agreement has a term of 50 years with 43 years remaining, and includes some of the following credit positive features: no termination for convenience from PRHTA is permitted; compensation payment for competing facilities that reduce traffic on the Project over the concession’s life; exemption of operational standards under force majeure events; recordable real interest in the form of an administrative concession over the roads; and toll increase at US CPI +1.5% annually without approval needed. Operating and Traffic History: The Project has a long operating history since 2011 when the roads were first privatized, and traffic history since the 1970s when the roads were built. Traffic history has shown the roads’ significant resiliency to economic recessions, weather events, and toll increases. Financial Structure: The Project has strong DSCRs throughout the term of the debt, even under scenarios assuming no traffic growth, very low inflation, and higher operating expenses. Under KBRA’s base case, average DSCRs are around 2.22x and the minimum DSCR is expected to be 1.51x.
The rating also reflects the Project’s following weaknesses:Traffic Risk: The Project is fully exposed to traffic or volume risk which can be volatile depending on the economic and demographic conditions of the capture area. Weak Local Economy: The macroeconomic outlook of Puerto Rico is challenging due to the impact of Hurricane Maria on local businesses, housing, and infrastructure and the government’s restructuring negotiations, which have impeded additional investment in the island. However, progress has been made on both fronts, with the approval of the fiscal plan in April 2018 and substantial federal aid to be spent in the next few years in Puerto Rico. Population Decrease in Capture Area: Population in Puerto Rico has decreased from its peak in the mid-2000s of close to 3.8 million to an estimated 3.4-3.5 million in 2017. There were concerns that Hurricane Maria would cause a deeper exodus to the mainland. However, many of the people that left in the aftermath of Hurricane Maria – estimated in the hundreds of thousands - have since returned to the island.
The Stable Outlook reflects our view that traffic will remain at levels similar to what has been observed over the past two years with upside potential due to the recovery efforts on the island. KBRA expects that Metropistas will continue to successfully operate and maintain the Project.
The rating is based on KBRA’s Global Project Finance Rating Methodology, published November 28, 2017.
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About KBRA and KBRA Europe
KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus, is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
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CONTACT: Analytical Contacts:
Marisol Gonzalez de Cosio, Senior Director
firstname.lastname@example.orgAndrew Lin, Director
KEYWORD: UNITED STATES NORTH AMERICA NEW YORK
INDUSTRY KEYWORD: PROFESSIONAL SERVICES BANKING FINANCE
SOURCE: Kroll Bond Rating Agency
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PUB: 11/26/2018 12:06 PM/DISC: 11/26/2018 12:06 PM