CHICAGO--(BUSINESS WIRE)--Fitch Ratings expects to assign the following international local currency ratings with a Stable Outlook to the proposed issuance of senior secured notes by Taboada Finance Limited, a special-purpose company incorporated in the Cayman Islands:
--S/.448,000,000 notes due 2026 series 2011-1 'BBB(exp)' ILC;
--S/.375,000,000 notes due 2033 series 2011-2 'BBB(exp)' ILC;
--Up to S/.100,000,000 notes 2033 series 2011-3 'BBB(exp)' ILC.
Fitch's ratings of the notes address the likelihood of timely payment of interest and principal.
The underlying issuance is a securitization of rights to receive future payments from Servicio de Agua Potable y Alcantarillado de Lima (SEDAPAL), the state-owned water utility company for the districts of Lima and Callao, related to the construction of Planta de Tratamiento de Aguas Residuales Taboada (Taboada), a wastewater treatment plant by ACS Servicios, Comunicaciones y Energia S.L. (ACS), the primary sponsor of the transaction through its local concessionaire, Planta de Tratamiento de Aguas Residuales Taboada S.A. (PTAR Taboada). The notes are supported by three potential payment sources, flows received from SEDAPAL of all water bill customer payments through banks, the direct obligation of SEDAPAL in the event that collections are insufficient to cover debt service and ultimately an obligation by the Government of Peru (GOP) through the Ministry of Housing, Construction and Sanitation (MVCS) to provide for any debt service shortfalls. Construction is expected to be completed in three phases, with the final completion date estimated to be July 2013. RPIs are expected to be issued at each of the three phases based upon the percentage of work completed.
The expected rating of 'BBB' for the proposed notes is driven by the following factors:
--The nature of the underlying flows from SEDAPAL, which is the sole provider of water utility services in the Lima/Callao district. As of September 2010, the bank collections from SEDAPAL provide for a debt service coverage ratio of 2.8 times (x).
--Performance risk and GCA score of SEDAPAL which imply that there would be a strong level of support by the government in the event of financial difficulties at SEDAPAL.
--The ultimate sovereign guarantee of Peru.
--Key structural features including reserves for debt service and inflation.
--No exposure to construction risk.
--The ability to incorporate additional projects into the trust.
The notes will be offered under Regulation S to non-U.S. persons outside the U.S. and to U.S. investors pursuant to rule 144A. The proceeds of the issuance will be used towards the purchase of retribucion por inversion (RPIs) payments RPICAOs from PTAR Taboada, the funding of reserve accounts, and transaction expenses. PTAR Taboada will build the Taboada project and will receive Certificados de Avance de Obras (CAOs) from SEDAPAL as certain construction milestones are reached. The CAOs originate RPIs and the issuance of an individual CAO gives the owner the right to receive 80 equal consecutive quarterly fixed payments (RPICAOs) in proportion to the overall work completed. The RPICAO purchaser, Taboada RPICAO Purchase LLC, will acquire all eligible RPICAOs from the concessionaire, PTAR Taboada, and will then sell these to the issuer, Taboada Finance Limited. Eligible RPICAOs are defined as unpaid RPICAOs that have been granted to the concessionaire. The RPICAO payments are guaranteed by the GOP as represented MVCS. After construction of Taboada, the concessionaire will receive retribucion por mantenimiento y operacion (RPMOs) for operating the project, which are not securitized in this transaction. RPIs are denominated in nuevos soles and are adjusted for every 3% accumulated variation of the Indice de Precios al Por Mayor (IPM) inflation Index.
The transaction is structured in three separate tranches. The series 2011-1 and series 2011-2 will be funded at closing while the series 2011-3 may be drawn only after project completion. The amount of the 2011-1 and 2011-2 notes being issued assume a maximum 5% aggregate reduction in the nominal value of each RPICAO due to a polynomic adjustment and a maximum retail inflation (IPC index) of 5% per annum (p.a.) between the closing date and the maximum completion date of each of the three construction stages.
The series 2011-3 may be drawn upon only after the project has been fully completed. In the event that the actual polynomic and/or retail inflation adjustments are more favorable than the assumed levels, resulting in the receipt of additional RPICAO flows, the series 2011-3 notes will be funded in an amount equal to the net present value of such additional RPICAO flows, up to a maximum of S/.100 million.
While additional projects may be added to the trust as long as the combined DSCRs are equal to or greater than 1.1x and a rating confirmation for the existing projects is provided by Fitch, the expected rating is not based upon the 1.1x minimum requirement but is reflective of the current pro forma coverage level of 2.4x which contemplates the addition of a third project. Depending on the performance of the underlying collateral and resulting DSCRs, issuing additional debt could cause a downgrade in these notes.
For more details related to Fitch's rating criteria applied, please see the related pre-sale report 'Taboada Finance Limited Senior Secured Notes Series 2011-1, 2011-2, and 2011-3,' Feb. 16, 2011. The construction of the Taboada project is part of a new addition to the existing water collection plant, Interceptor Norte. When completed, the Taboada project will treat the water collected at this plant. Once the wastewater is collected and treated to remove organic contaminates, fats, and sand, it is then sent to the ocean where the saltwater completes the treatment process. This is a cost effective solution, which will have a low impact on marine life, and will quickly improve the treatment of wastewater of Lima.
ACS has an extensive track record in this type of project, having built more than 300 wastewater treatment plants worldwide. The project is expected to be one of the biggest wastewater treatment plants in South America.
Fitch expects to rate the notes 'BBB'. Final rating assignment is subject to completion of legal documentation review and analysis.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 16, 2010);
--'Future Flow Securitization Rating Criteria' (March 3, 2010).
Applicable Criteria and Related Research: Taboada Finance Limited Senior Secured Notes Series 2011-1, 2011-2, and 2011-3.
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=596685
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547326
Future Flow Securitization Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=502672
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