European Infrastructure Finance Yearbook - Investing In Bonds ...

Publication Date:
June 13, 2007
Issue Credit Rating:
Senior secured debt
BBB-; BBB-/Stable
Primary Credit Analyst:
Karim Nassif,
London,
(44) 20-7176-3677
Secondary Credit Analyst:
Alexandre de Lestrange,
Paris,
(33) 1-4420-7316
AUTOROUTES PARIS-RHIN-RHONE
Rationale
The senior unsecured debt rating on the French
toll road operator Autoroutes Paris-Rhin-Rhone’s
(APRR) seven-year, €1.8 billion, revolving credit
facility maturing in 2013 is ‘BBB-’. The outlook is
stable. As of May 25, 2007, the facility had a
utilization of €0.8 billion. At the same date, total
debt was €6.4 billion.
Since its privatization in 2006, APRR is
81.48% owned by Eiffarie (not rated), a
consortium controlled by Eiffage and Macquarie
Autoroutes de France (MAF). The remaining
shares are publicly held. Total debt at Eiffarie as
at May 25, 2007, is €3.9 billion. The APRR
group includes both APRR and Eiffarie, which,
because Eiffarie is an 81.48% shareholder, leads
us to consolidate the debt of Eiffarie into APRR.
We have fully consolidated Eiffarie’s debt and
related interest expenses with those of APRR
because we treat the two entities as one group for
default analysis purposes. Eiffarie’s debt is
nonrecourse to APRR.
APRR is the third-largest toll-road operator in
Europe, with a network of 2,215 kilometers (km;
1,370 miles) in service and 2,279 km under
concession until 2032. APRR group’s highway
concession network is well located across central
and eastern France, representing the major axes
between the two wealthiest French regions, Ile-de-
France (AAA/Stable/A-1+) and Rhône-Alpes, and
the two largest French cities of Paris
(AAA/Stable/--) and Lyon, as well as links to
Benelux and Germany. APRR’s subsidiary AREA
has the major road network connection to the
Alps, related ski resorts, and Geneva, Switzerland.
The network therefore comprises key economic
and tourist corridors to southern France. No
major new competing roads or transport links
are expected.
The revolving credit facility is sized to support
about two years of capital expenditures, debt
repayments to Caisse Nationale des Autoroutes
(CNA; AAA/Stable/--), and working capital at
APRR following its acquisition by Eiffarie.
The ‘BBB-’ rating reflects the following risks:
• APRR has an aggressive financial structure,
with low debt service coverage levels and
high consolidated leverage, taking into
account total debt at APRR and Eiffarie.
Standard & Poor’s Ratings Services’ base
case assumes traffic growth of 1.75% over
the life of the concession, with consolidated
STANDARD & POOR’S EUROPEAN INFRASTRUCTURE FINANCE YEARBOOK
PROJECT FINANCE/PUBLIC-PRIVATE PARTNERSHIPS
minimum debt service coverage at 1.31x.
This minimum occurs in 2012, based on an
assumed refinancing of the Eiffarie debt in
2011, and an assumed amortization profile
post refinancing. Prior to the forecast
refinancing, the minimum coverage ratio is
1.42x. Although this is low compared with
other rated highways projects with traffic
risk, the maturity and large scale of APRR’s
road network mitigate this.
• The structure contains considerable
refinancing risk, as significant debt amounts
are due from CNA by 2018. We understand
that APRR is currently looking at ways to
refinance CNA obligations due in late 2007
and beyond. APRR also has large capital
expenditure requirements, and the Eiffarie
acquisition facility has little amortization
until it needs to be refinanced. Although the
revolving credit facility, the strong cash flow
generating ability over the life of the
concession, and an increasing cash sweep in
the acquisition facility mitigate refinancing
risk, it remains higher than that of
comparable investment-grade transactions.
• Although Standard & Poor’s takes a
concession financing approach to APRR, we
regard the overall structural package, with
regard to shareholder lock-in periods, as
weaker than those of comparable
investment-grade concessions. The
privatization process resulted in lock-in
requirements for Macquarie and Eiffage of
two and 10 years, respectively. Given the
importance of retaining two balanced
shareholders in the structure, the absence of
further structural mitigants to prevent the
emergence of a dominant shareholder
remains a key structural weakness.
• Traffic growth was weak in 2006, but has
shown recovery in the first quarter of 2007.
Traffic growth reported for 2006 at 1.3%
was below what we considered to be a
conservative assumption of 1.75% traffic
growth under our base case. Nevertheless,
although traffic growth has been low and is
not expected to improve substantially over
the short term, revenues have met budgeted
targets and are expected to continue to do
so going forward.
• Although about 95% of all debt at Eiffarie
and APRR is hedged, the structure remains
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