European Infrastructure Finance Yearbook - Investing In Bonds ...

TRANSPORTATION INFRASTRUCTURE
68 ■ NOVEMBER 2007
Class Rating* Amount Interest** Legal final
(mil.) maturity
G1¶ AAA§, (SPUR BBB) £300 Formula that accounts for relevant
index-linked UKTi and interest rate
of 3.487%
June 30, 2042
G2¶ AAA§, (SPUR BBB) £150 Formula that accounts for relevant
index-linked UKTi and 3.487%
June 30, 2042
G3¶ AAA§, (SPUR BBB) £300 Formula that accounts for relevant
index-linked UKTi and 3.487%
June 30, 2042
G4 AAA§, (SPUR BBB) € 73 Formula that accounts for relevant
index-linked OATi and 3.377%
June 30, 2041
G5 AAA§, (SPUR BBB) € 147 Formula that accounts for relevant
index-linked OATi and 3.377%
June 30, 2041
G6 AAA§, (SPUR BBB) € 147 Formula that accounts for relevant
index-linked OATi and 3.377%
June 30, 2041
A1 BBB £400 6.341% June 30, 2046
A2 BBB € 645 5.892% June 30, 204
A3 BBB £350 Six-month LIBOR plus 1.25% June 30, 2050
A4 BBB € 953 Six-month EURIBOR plus 1.25% June 30, 2050
Sterling liquidity notes A- £175 Six-month LIBOR plus 0.60% Dec. 30, 2050
Euro liquidity notes A- € 160 Six-month EURIBOR plus 0.60% Dec. 30, 2050
R NR
*Standard & Poor’s ratings address timely interest and ultimate principal on the notes.
¶The margin is 3.47% until June 30, 2009 and 2.887% thereafter.
§The ‘AAA’ ratings are supported by the unconditional guarantee provided by AMBAC Assurance U.K. Ltd. for the class G1 and G4 notes, FGIC UK Ltd. for the
class G2 and G5 notes, and Financial Security Assurance (U.K.) Ltd. for the class G3 and G6 notes.
**Subject to a step-up fee from July 30, 2012 for the class A3 and A4 notes. As part of Standard & Poor’s analysis, the step-up fee was modeled as being
fully subordinated to the payments on all the classes of notes and not rated.
NR--Not rated.
Standard & Poor’s notes that, although there are
arguments to sustain the view that the lenders’
right of substitution under the concession should
remain enforceable in the insolvency of the
borrower, this has never been tested and therefore
is not a determinant of the rating. Hence, the
rating approach is closer to a concession or
corporate financing than a traditional
securitization.
The rating approach is also reflected in the
transaction’s leverage. Compared with traditional
corporate securitization transactions, the leverage
is high given Eurotunnel’s business risk, and the
legal and structure features. Conversely, other
infrastructure operators can bear similar
leverages; for instance, Autoroutes Paris-Rhin-
Rhone’s (APRR) facility is rated ‘BBB-’ with a
maximum consolidated leverage of about 11.2x
(in 2006) and minimum DSCR of 1.31x (in
2012). APRR is the third-largest toll road
operator in Europe, with a network of 2,205
kilometers in service, and is under concession
until 2032.
Ratings Detail
STANDARD & POOR’S EUROPEAN INFRASTRUCTURE FINANCE YEARBOOK
In the project finance market, transactions with
higher leverages have reached investment grade.
For instance, 407 International Inc. (a toll road in
Canada) had total debt/EBITDA of about 12.7x
at the end of 2006, including subordinated debt.
The senior rating is ‘A’, while the rating is ‘BBB’
for subordinated debt. The subordinated debt was
stripped of most of its covenants (no pledge of
shares) and the rating resides mostly on strong
coverage, and solid performance and demand
characteristics. Total DSCR (including notional
amortization of principal) is estimated to be 1.4x
in 2009 and 2010. Debt amortizes in 2039 for a
99-year concession.
Supporting Ratings
Institution/role Ratings
Deutsche Bank AG as issuer bank account
provider and hedging provider
AA/Stable/A-1+
Goldman Sachs Group Inc. as hedging provider AA-/Stable/A-1+
AMBAC Assurance U.K. Ltd. AAA/Stable/--
FGIC UK Ltd. AAA/Stable/--
Financial Security Assurance (U.K.) Ltd. AAA/Stable/--