NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the long-term rating assigned to ENA Este's S.A. USD212 million secured debt due 2024 at 'BBB-'. Fitch has also affirmed ENA Este's national scale ratings at 'AA+ (pan)'. The Rating Outlook is Stable.
The rating affirmation reflects the essential and long lived nature of the transportation asset, a price setting framework that provides some flexibility to adjust toll rates, a strong debt structure which includes sufficient liquidity mechanisms and structural features to cover timely debt service obligations and an adequate plan to maintain the road's infrastructure once it starts operating. The rating is constrained by a high degree of leverage when compared with peer transactions and its partial dependence on ENA Sur's excess cash flow distributions.
The Stable Outlook incorporates the view that initial tariff levels will be set and opening volumes would be sufficient as to ensure credit metrics according the Fitch's original expectations, despite the loss of toll revenues due to the construction delay.
KEY RATING DRIVERS
Construction of Phase IIB [Completion Risk: Midrange]: Completion of Phase IIB has been delayed significantly principally due to milestone delays caused by ICA Panama (ICAPSA), the EPC contractor and by changes in design and scope of Phase IIB project from new government. Offsetting the construction delay are robust contingencies and sufficient liquidity to cover debt service obligations in the intermediate term. According to the independent engineer, construction is upwards of 99% complete and remaining milestones are limited to ancillary items. As such, Phase IIB is expected to be fully operational by November 2015.
Essential Transportation Asset [Volume Risk: Midrange]: Phase IIB is part of Corredor Norte which is an instrumental road for commuters and commercial traffic. The road connects Albrook airport in the west to Tocumen in the eastern part of Panama City. The road serves a large commuter base with growing economic and commercial activities. The asset is owned by Empresa Nacional de Autopistas (ENA), which in turn is owned by the Republic of Panama.
Sufficient Tariff Levels [Price Risk: Midrange]: Initial tariff levels may be adjusted up to inflation only and are subject to government review. Still, price elasticity of demand at Corredor Norte has shown positive historical behaviour, which is primarily a reflection of the evolving traffic trends in Panama City. Specifically, as congestion on roadways has increased, residents have placed a greater value on time savings and become less responsive to price variations.
Adequate infrastructure program: [Infrastructure Development/Renewal: Midrange] Phase IIB is expected to benefit from an adequate plan to maintain the road's infrastructure once it begins operations. The asset is operated by Maxipista de Panama S.A., a wholly owned subsidiary of ICATECH. Maxipista is an experienced operator in Panama and is the operator for both ENA Norte and Sur. The operating quality and performance of the operator is closely monitored by the ENA.
Robust Structural Features [Debt Structure: Stronger]: The project is structured with a pass-through amortization scheme that prohibits cash distributions while the notes are outstanding and employs all excess cash for the repayment of principal. Liquidity reserves, particularly for debt service, are considered sufficient to maintain financial stability during stressed periods.
Financial Metrics: ENA Este's leverage is significant in the first five years and requires a combination of robust traffic growth and toll rates increases in the initial years of operations to preserve financial flexibility. Base case LLCR at 1.2x is low for the rating category. This weakness is mitigated by the asset's long life, which provides a considerable timeframe for debt to be refinanced should the need arise.
Peer Analysis: ENA Este's leverage with base case LLCR of 1.2x) is higher than its Panamanian peers (ENA Norte Trust and ENA Sur Trust both rated 'BBB'/ 'AAA(pan)'; Outlook Stable by Fitch) which have LLCR ratios of 1.49x and 1.68x, respectively. ENA Este's lower rating partially reflects reliance on excess cash flows from ENA Sur following payment of the Class B notes.
RATING SENSITIVITIES
Negative
--The inability of the issuer to generate sustainable cash flows from a combination of sufficient tariffs and traffic levels in line with initial projections.
--Sustainable lag in amount and timing of ENA Sur excess cash flow could pressure financial ratios.
Positive
--A positive rating action is unlikely given the high dependence on sustainable traffic performance above base case expectations during the intermediate term.
SUMMARY OF CREDIT
The principal construction consists of the completion of El Golf- Tocumen segment (Phase IIB) expected to be in operation by November 2015. The project involves the construction of a tolled highway with two lanes in each direction. The longitude of Phase IIB is approximately 9.9 km, running in a west to east direction, from the Las Lajas Interchange, at the eastern terminus of Phase IIA, to the 24 de Diciembre segment. Phase IIB will effectively link up with the Panamerican Highway which in turn is a continuation of the eastern terminus of Corredor Sur. In addition, the project includes the construction of the Gonzalillo-Pedregal road segment and an electronic tolling system.
Phase IIB is essentially an extension of Corredor Norte, which is one of two principal roads in Panama. Corredor Norte is a commuting toll road which extends through the northern portion of Panama with over 90% of its traffic composed of automobiles.
ENA Este Trust is the issuer of the notes with Banistmo S.A. acting as trustee for the benefit of noteholders. The trust was capitalized by ENA Este S.A. which transferred its concession rights to the trust. ENA Este S.A. is a subsidiary of Empresa Nacional de Autopista S.A. (ENA). ENA is an entity wholly owned by the government of Panama, with the purpose of acquiring companies that have been granted concessions for the construction, maintenance, and operation of toll roads. ENA is financially autonomous and supervised by the general comptroller of the Republic of Panama.
ENA Este Trust issued USD212 million of notes collateralized by toll collections of four toll plazas including Las Lajas, Villalobos, Rana de Oro and Mananitas. Project's revenues also include expected excess cash flows from ENA Sur Trust beginning in 2020.
The completion of Phase IIB is a year behind schedule, however, according to the Independent Engineer, construction is over 99% advanced and expected to be fully operational by November 2015. The delay risk is mitigated by the relatively low complexity of remaining construction and modest associated cost.
The structure includes a robust debt service reserve account (USD52 million initial amount) which, coupled with a flexible target amortization schedule, have allowed for rating stability and timely debt service despite the absence of project's revenues due to completion delay.
Additional information is available on www.fitchratings.com
Applicable Criteria
Rating Criteria for Infrastructure and Project Finance (pub. 12 Jul 2012)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682867
Rating Criteria for Toll Roads, Bridges and Tunnels (pub. 20 Aug 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=758708
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=990109
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=990109
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.