Fitch Ratings has affirmed
The Rating Outlook is Stable. The international and local notes are supported by the cash flow generation from
RATING RATIONALE
AdS's ratings reflect the asset's traffic and revenue profile as a toll road that serves a strong reference market within
Fitch's rating case average debt service coverage ratio (DSCR) of 1.2x is in line with Fitch's criteria guidance for the assigned rating. Nonetheless, minimum DSCR is 0.9x. Fitch believes the eventual shortfalls in debt coverage will likely be covered by the reserve accounts available within the structure. Under this scenario, Fitch expects the project will receive minimum revenue guarantee (MRG) payments from 2028 onward, which totals 7% of annual revenues on average.
KEY RATING DRIVERS
Heavy Traffic of Mostly Commuters Growing [Revenue Risk - Volume: Midrange]
The asset is a toll road that serves a strong reference market, playing an important role in the broader transportation system. The road serves as a link between
Adequate Rate Adjustment Mechanism [Revenue Risk - Price: Midrange]
Toll rates are adjusted quarterly to reflect changes in the Costa Rican colon (CRC) to
Suitable Capital Improvement Program [
The asset is operated by an experienced global company with a higher-than-average expense profile due to its geographical attributes. The majority of the investments required by the concession have been made. The concession requires lane expansions when congestion exceeds 70% of the ideal saturation flow, which triggers the need for further investments. However, the project would only require the grantor to perform these investments to the extent they do not represent a breach in the DSCRs assumed by the issuer in the financing documents.
Structural Protections Against Shortened Concession [Debt Structure: Midrange]
Debt is senior secured, pari passu, fixed-rate, and fully amortizing. The debt is denominated in USD, but no significant exchange rate risk exists due to the tariff adjustment provisions set forth in the concession and because CRC-denominated toll revenues will be converted to USD daily. The structure includes an NPV cash trap mechanism to prepay debt if revenue outperforms the base case revenue indicated in the issuer's financial model, which largely mitigates the risk of the concession maturing before the debt is fully repaid. Typical project finance features include a six-month debt service reserve account (DSRA), a six-month backward and forward-looking 1.2x distribution trigger and limitations on investments and additional debt.
Financial Profile
Under Fitch's base case, the project yields a minimum and average DSCR of 1.0x (in 2023) and 1.4x, respectively. While under Fitch's rating case, minimum and average DSCR are 0.9x (in 2023) and 1.2x, respectively. The eventual shortfalls in debt coverage will likely be covered by the reserve accounts available within the structure. The concession is expected to expire in
PEER GROUP
Comparable projects in the region include
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Traffic performance (expressed as Weighted Annual Average Daily Traffic or WAADT) significantly below the Fitch's rating case expectation of 42,304 vehicles in 2023;
Substantially greater than expected traffic loss occurs due to the advancement of works in the competing route. Fitch's rating case expectation is a loss of 15.0% in 2025 and 23.5% in 2028;
A deterioration of the liquidity available for debt service, beyond the expected use of reserves.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
Traffic performance (WAADT) above Fitch's base case expectation of 43,177 vehicles in 2023 and 43,613 vehicles in 2024.
Best/Worst Case Rating Scenario
International scale credit ratings of Sovereigns, Public Finance and Infrastructure issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
TRANSACTION SUMMARY
The asset serves as a connection between the city of
CREDIT UPDATE
As of
Traffic mix has shifted slightly since the pandemic, with a proportional increase of heavy vehicles (7.5% in 2022 from 6.3% in 2019) as it decreased less than other categories, and a decline in bus traffic generally due to pandemic-related effects that prevail on public transportation. This is consistent with what Fitch has observed with other toll roads, given the significant effects of pandemic-related measures on commuting and touristic traffic.
Revenues from January to
According to the concessionaire, part of the road is built on a sloping embankment, which has presented constant settlement issues. As this situation worsened, it was concluded that to avoid the risk of landslide, it was necessary to construct a viaduct without any support on the potentially sliding surface. Construction began in 2021, but was delayed due to lack of permits and other negotiations with the government. It is projected to be completed in
DSCR as of
According to the concessionaire, the first of five phases of undelayable work to the competing route
FINANCIAL ANALYSIS
Fitch's base case assumes traffic recoveries in 2023 and 2024 to 99% and 100%, respectively, relative to 2019 levels. From 2025 until 2033, Fitch expects a compounded annual growth rate (CAGR) of 4%. From this baseline, Fitch deducts the expected effect of the expansion and improvement of the competing road with traffic drops of 7.5% in 2025 and 11.8% in 2027. O&M and major maintenance expenses were projected following the issuer's budget plus 5% stress plus annual
Fitch's rating case assumes traffic recoveries in 2023, 2024 and 2025 of 97%, 98% and 100%, respectively, relative to 2019 levels. From 2026 until 2033, Fitch expects a compounded annual growth rate of 4%. From this baseline, Fitch deducts the expected effect of the expansion and improvement of the competing road with traffic drops of 15% in 2025 and 23.5% in 2027. O&M and major maintenance expenses were projected according to the issuer's budget with a stress rate of 7.5% plus annual
This scenario resulted in a minimum and average DSCR of 0.9x (in 2023) and 1.2x, respectively. Under this scenario, MRG will be received from 2028 onward.
According to the concessionaire, the
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
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