NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the 'B' rating on $162 million outstanding senior secured notes for Autopistas del Nordeste (Cayman) Ltd. The Rating Outlook is revised to Positive from Stable.
KEY RATING DRIVERS:
Strong Support from Government: The government pledged a Minimum Revenue Guarantee (MRG) throughout the life of the notes, recognized as a financial obligation by the Government;
Limited Competition: Autopistas del Nordeste (AdN) significantly reduces the travel distance between Santo Domingo and Samana;
Predictable Operating Costs: A fixed operation and maintenance agreement with experienced operator considerably reduces cost escalations;
Substantial Counterparty Risk: The legal framework and business environment in Dominican Republic are consistent with the country's 'B' credit rating;
Low Traffic Performance: The road is currently in a ramp-up period. Traffic performance has been below projections for this period and revenues highly depend on MRG support.
WHAT COULD TRIGGER A RATING ACTION?
--Government fails to pay amounts owed under the concession agreement including MRG;
--Traffic performance significantly improves, allowing the project to become self-sustained.
SECURITY
The notes are secured by all revenues received by the company, the rights of the concession, contracts and all issued and outstanding shares of the company pledged to the Trustee.
CREDIT UPDATE
The toll road, completed in 2009, connects Santo Domingo with the northern province of Samana. The project extends along 106 kilometers (approximately 66 miles) and includes three toll plazas. In comparison to alternative roads, AdN considerably reduces the travel distance between Santo Domingo and Samana. Traffic performance is currently going through a ramp-up period and improving at a slower pace than initially projected.
The project's ability to timely meet its financial obligations heavily relies upon the government support. The government, through the Ministry of State of Public Works and Communications, pledged a MRG to ensure the timely payment of the road's financial obligations.
The MRG was designed to cover the costs associated with the operations and maintenance, and to service the debt issued for the construction of the road.
The Congress of Dominican Republic previously approved the Memorandum of Completion of the Stage of Design Revision and Traffic Demand Study, and the Memorandum of Completion of the Stage of Realizing the Financial Closing. Congress approval of the memorandums formalized the obligation of the Dominican government towards the project, as stated in the Concession Contract. Fitch is of the view that this explicit financial obligation by the government largely reduces revenue risk.
The project also has in place a partial political risk guarantee provided by the Multilateral Investment Guarantee Agency (MIGA). In the event that the government fails to meet timely payments under the MRG, the MIGA policy will be triggered. Expected disputes over a breach of contract will be solved through the American Arbitration Association in New York courts.
Under the MIGA guarantee, MIGA would make a compensation payment of an amount up to 51% of any scheduled interest or principal of the outstanding debt, due to political events including breach of contract.
Autopistas del Nordeste (Cayman) Limited is the issuer, created under the laws of the Cayman Islands, which is an exempted limited liability company owned by a consortium composed by: Organizacion de Ingenieria Internacional SA, Odinsa Holding Inc., CI Grodco S en CA Ingenieros Civiles, Grodco Panama, Consorcio Remix, Caribbean Basin Construction Corporation Ltd.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Rating Criteria for Infrastructure and Project Finance', Aug. 16, 2010;
--'Rating Criteria for Toll Roads, Bridges and Tunnels', Aug. 10, 2010.
Applicable Criteria and Related Research:
Rating Criteria for Infrastructure and Project Finance
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548345
Rating Criteria for Toll Roads, Bridges, and Tunnels
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=543265
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