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Moody's downgrades Cintra's credit rating on SH 130 for foreseeable future

Category: Public Private Partnerships

Link to Moody's downgrade announcement here.

Rating Action:
Moody's downgrades the ratings on SH 130 Concession Company Senior and TIFIA loans to B1
Global Credit Research - 12 Apr 2013
Downgrade affects $1.1 billion of outstanding debt

New York, April 12, 2013 -- Moody's Investors Service has concluded the review period for the ratings of the SH 130 Concession Company. The rating on the Senior Bank Facility, which has $686 million outstanding have been downgraded to B1 from Baa3. The Transportation Infrastructure Finance and Innovation Act (TIFIA) loan, which has $451 million outstanding to B1 from Ba1. The outlook on both ratings is negative.

RATINGS RATIONALE
While the road is still early in its traffic ramp-up phase after only six months of operation, traffic and revenues are coming in at around half the level projected in the original traffic and revenue study . Furthermore the financial close forecasts assumed a significant ramp-up profile continuing over the early years, so traffic will now need to grow aggressively over the next two years even to stay at a consistent percentage of the initial forecast. The company has shared its budget for 2013 but has not yet shared an updated projection model for the life of the debt. Based on Moody's own projections the company will use the liquidity facility to meet debt service in June 2013 and need to draw on committed contingent equity to meet the December 2013 debt service payment. The company should have enough remaining contingent equity to fund the June 2014 payment, but not enough to meet the December 2014 payment in full. There is therefore a material chance of a default before the end of 2014 should traffic fail to grow sufficiently and absent any remediation support on the part of the company.

SH130 Concession Company LLC is a limited liability company owned by Cintra Tx 56, LLC (65% ownership) and Zachry Toll Road 56, LP (35% ownership) which has the concession granted by granted by the Texas Department of Transportation (TxDOT) for the southern most sections of SH 130 which encompass 40 miles of a 90 mile bypass around the city of Austin, Tx. The road opened to traffic in October 2012, which was one month ahead of the start of operations per the facility agreement, but approximately four months behind the originally anticipated date. The road began charging tolls in November. The history of traffic and revenue is limited to that of the five months it has been in operation, from November 2012 to March 2013.

The project financing was structured, from the beginning, to contemplate the use of a $35 million liquidity facility that was put in place in order to support debt service payments in the first 18 to 24 months of operations. The structure also includes a sponsor commitment for contingent equity in an amount of $30 million. Given the relatively modest delay in the start of operations and more due to the lower than anticipated revenue generation, a larger portion of the liquidity facility was used to augment operating cash flows for the debt service payment in December 2012. A debt service reserve fund is also part of the security package, but it is not required to be funded until 2016. The fact that the debt service reserve is not yet funded is a further weakness. Even if traffic and revenue grow sufficiently strongly to deliver 1.00x coverage from 2017 when TIFIA repayments start (taking total debt service to approximately $78m per annum), the absence of a cash reserve means the company will likely have no safety margin and be at elevated risk of default throughout the next few years.

Moody's notes ongoing initiatives both by the company and TxDOT to stimulate usage of the road, and still awaits an updated long term financial plan from the company to allow it to meet debt service obligations through 2014 and 2015, together with the much higher obligations that kick in from 2017 onwards once repayment commences on the TIFIA loan.

The negative outlook reflects Moody's view that traffic and revenue information that will point to a longer trend for the road will be gathered over the next 12 to 18 months. We will continue to monitor monthly traffic and revenue activity and trends, as well as any updated projections that are generated, in order to continue to more readily assess the ability of the concession company to meet its financial and debt obligations. Absent extremely strong and sustained growth or other measures to support the project, further negative rating action is likely.

The rating on the TIFIA loan was downgraded to be on parity with the senior bank loan, given the springing lien on the TIFIA facility, which will put it pari passu with senior debt if there was a bankruptcy related event of the concessionaire.

The principal methodology used in this rating was the Operational Toll Roads Industry Methodology published in December 2006. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Laura Barrientos

VP - Senior Credit Officer

Corporate Finance Group

Moody's Investors Service, Inc.

250 Greenwich Street

New York, NY 10007

U.S.A.
JOURNALISTS: 212-553-0376

SUBSCRIBERS: 212-553-1653

Chee Mee Hu
MD - Project Finance

Corporate Finance Group

JOURNALISTS: 212-553-0376

SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.

250 Greenwich Street

New York, NY 10007

U.S.A.
JOURNALISTS: 212-553-0376

SUBSCRIBERS: 212-553-1653

___________________________________________________________________________

Moody's downgrades toll road company
By Vianna Davila, Staff Writer
Wednesday, May 29, 2013

Moody's Investor Service has downgraded the credit rating of the private company that built and operates the Texas 130 toll road extension, a rating that could continue to drop unless traffic “aggressively” grows on the road in the next two years.

Moody's issued the rating April 12 after putting the

SH 130 Concession Co., a partnership between Spanish-based Cintra and San Antonio's Zachry American Infrastructure, on review in March.

The toll road, from Seguin north to South Austin, was billed as the nation's fastest when it opened to drivers in late October, boasting an 85-mph speed limit.

But traffic counts on the road are about half the initial projections, the Moody's report said, forcing the company to dip into its financial reserves to make loan payments and raising concerns about the possibility of future default.




Link to article here.

By contrast, the publicly-operated Harris County Toll Authority had its credit rating improved. Despite this development, the agency still carries $2 billion in debt. When coupled with the North Texas Tollway Authority's debt and the State of Texas' road debt, it exceeds $35 billion in principal and interest. Add in the Regional Mobility Authorities debt, and the number continues to mushroom.

Fitch raises Texas' Harris County revenue bond rating to AA
Reuters
April 19, 2013

(Reuters) - Fitch Ratings on Friday raised the rating on Harris County, Texas, senior lien toll revenue bonds to AA from AA-minus, affecting about $2 billion of debt.

The upgrade of the bonds that were issued on behalf of the Harris County Toll Road Authority reflects strong financial flexibility and cash position, the ratings agency said in a statement.

Fitch said the authority's strong cash position of at least $800 million in the past six years has enabled it to generate annual surpluses, which allow them to fund "a large portion of any potential projects, thereby limiting its need to borrow additional debt."