Fitch Affirms Autopistas del Nordeste (Cayman) Ltd 'B' Rating; Outlook Stable
2009-06-26 16:45:04 -
Fitch Ratings affirms the 'B' rating on the $162 million senior secured notes of Autopistas del Nordeste (Cayman) Limited (AdN) due 2026. The Rating Outlook is Stable.
The rating reflects the completion of the toll road, Minimum Revenue Guarantee (MRG) honored by Government of Dominican Republic (GODR), an unconditional stand-by letter of credit (LOC) provided by Banco de Reservas de la Republica Dominicana, (a state-owned financial institution), and a partial credit guarantee from the Multilateral Investment Guarantee Agency (MIGA). The rating is constrained by significantly low traffic volume and increased reliance on MRG from GODR (IDR: 'B' by Fitch).
Even though the project has been partially opened to toll traffic since 2006, the construction for a 106 kilometer (km) toll road was completed in June 2008, thus completion risk that existed earlier with the project is no longer present. The road represents a saving of approximately 85 km of travel distance between Samana and Santo Domingo. As of March 31, 2009, the project had a cash balance of approximately $11 million and a $20 million of LOC. It is worth mentioning that to date GODR has honored the MRG and LOC remains unutilized. Given that the debt was being capitalized during construction phase of the project, the debt outstanding as of March 2009 was at $182 million. As required by the financial agreements; the project reduced the outstanding debt by $20 million in July 2008.
Since the opening of all three toll plazas in June 2008, traffic volume and revenues have been significantly below projections; thus, increasing reliance on the MRG, which is a constraining factor to the rating. As of April 2009, the traffic volume was approximately at 3,183 vehicles per day (v/d) at Toll Plaza 1, 2,527 v/d at Toll Plaza 2, and 2,198 v/d at Toll Plaza 3, approximately 41%-55% lower than the independent engineer's (IE) projections in the pessimistic scenario. Consequently, the revenue was approximately 58% below the IE's pessimistic projections. Fitch believes that unless there is significant growth in traffic in the next few years, the project would be highly dependent on the MRG to make debt service payments through maturity.
Other credit considerations included a MIGA Loan Guarantee. The MIGA Loan Guarantee covers up to 51% of the scheduled principal and interest.
This guarantee is activated in the event of transfer restriction, expropriation of funds, war and civil disturbance, or breach of contract, including minimum revenue guarantee of the GODR, which is key to the project's dynamics. As of May 2009, the MIGA guarantee amount was approximately at USD 95 million. In December 2008, the Congress approved certain amendments to key memorandums, mitigating the uncertainty of legal risks associated with the MIGA coverage that existed at financial close. With this amendment, the MIGA guarantee can be enforced after the arbitration process in the U.S. courts rather than the Dominican Republican courts. Fitch views these amendments favorably, as it reduces the time required for the MIGA guarantee to be enforced.
The notes were issued to help fund the construction of the Santo Domingo-Samana toll road in the Dominican Republic (DR). Bonds are secured by a senior lien on toll revenues and by a MRG provided by the Government of Dominican Republic.
The project consists of a 106 km toll road connecting the Las Americas highway from Santo Domingo to the Rincon de Molinillos junction in Samana. This road is expected to reduce the distance by 114 km and reduce traveling time commensurately. The road is being developed under a 33-year concession awarded by the GODR to a consortium of construction companies (Autopistas del Nordeste, C. por A.) which include ODINSA, GRODCO, and Remix.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com : www.fitchratings.com .
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Fitch Ratings, New YorkSam Kamath +1-212-908-0552Jorge
Yanes, +58 212 286-3356 (Caracas)Media Relations:Cindy
Stoller, +1-212-908-0526 cindy.stoller@fitchratings.com : mailto:cindy.stoller@fitchratings.com
