European Infrastructure Finance Yearbook - Investing In Bonds ...

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TRANSPORTATION INFRASTRUCTURE 84 ■ NOVEMBER 2007 level, Standard & Poor’s assumes the issuer would have to draw entirely on its debt-service reserve facility to meet its obligations on the notes. Estimated recovery Under the NPV approach, Standard & Poor’s assumes EBITDA to remain constant at £230 million per year in real terms (assuming an annual 2% inflation) from 2015 until 2050 (with capex and WC assumptions unchanged). The LLCR (loan life cover ratio) at year 2015 is at about 0.9x, calculated with a discount rate of 8%. Standard & Poor’s focused more on LLCR than on CLCR (concession life cover ratio); although the concession matures in 2086 and there will be cash flows beyond 2050, the visibility of cash flows more than 40 years from now is limited (especially as the RUC ends in 2052). In addition, with regard to the period between 2052 and 2086, the concessionaires will be obliged to pay to the states a total annual sum, including all corporate taxes of any kind, equal to 59% of all pre-tax profits. Under the debt multiple approach, Standard & Poor’s has estimated the recovery prospects based on: • A similar distressed EBITDA base of about £230 million; and • Average valuation multiples of 8x to 10x, representing a haircut with the current restructuring (10.5x to 11x), and more in line with some other infrastructure deals. This would result in a recovery ranging from about 60% to 74%. ■ STANDARD & POOR’S EUROPEAN INFRASTRUCTURE FINANCE YEARBOOK
Publication Date: July 23, 2007 Issuer Credit Rating: BBB+/Stable/-- Primary Credit Analyst: Maria Lemos, CFA, London, (44) 20-7176-3749 Secondary Credit Analyst: Alexandre de Lestrange, Paris, (33) 1-4420-7316 COPENHAGEN AIRPORTS A/S Rationale The rating on Copenhagen Airports A/S (CPH) is supported by the airport’s strong competitive position as a natural hub for Scandinavian countries. The rating also reflects CPH’s efficient aviation and strong commercial operations, the adequate regulatory environment, strong cash flow generation, and sound financial flexibility. Offsetting these strengths are CPH’s relatively large proportion of transfer traffic and high customer concentration. The rating is also constrained by the company’s weakened financial profile following Macquarie Airports (MAp)’s (BBB/Stable/--) acquisition of a controlling stake in CPH in December 2005 through financing vehicle Macquarie Airports Copenhagen Holdings ApS (MACH; BBB+/Stable/--). As a result of this partial acquisition we consolidate MACH’s debt with CPH’s own Danish krone (DKK) 2.0 billion debt (about €269 million), given the level of MACH’s control and ownership. The acquisition debt is nonrecourse to CPH, however, leaving CPH’s pre-existing debt structure unaffected. Copenhagen Airport handled 20.9 million passengers in 2006. In the first half of 2007, traffic increased by 2.3% year on year on the back of increased flight frequencies and new routes. CPH enjoys a strong competitive position, supported by its main carrier Scandinavian Airlines (SAS), which uses the airport as its regional hub. Nevertheless, CPH’s proportion of transfer traffic has been declining since 2003, albeit remaining high at about 30%, which Standard & Poor’s Ratings Services considers a weakness. Moreover, the company derives about half of its passenger volume from SAS and runs the risk of losing part of its transfer traffic if SAS ceases to operate. CPH achieved an EBITDA margin of 54.1% in 2006--which is high compared with peers--owing to its efficient operations, strong cost manage- STANDARD & POOR’S EUROPEAN INFRASTRUCTURE FINANCE YEARBOOK TRANSPORTATION INFRASTRUCTURE ment, and successful commercial operations, which rank among the best in Europe. At June 30 2007, gross debt at MACH and CPH combined declined to DKK7.1 billion, from DKK8.9 billion at Dec. 31, 2006, as proceeds from a special dividend distribution from CPH’s associated company Newcastle International Airport Ltd. and from the sale of CPH’s Chinese and part of its Mexican operations were used for debt repayment. At end-December 2006, funds from operations (FFO) to average total debt and FFO interest coverage were 12.6% and 3.2x, respectively, and free cash flow generation was DKK494.7 million, according to Standard & Poor’s calculations. Liquidity CPH has strong liquidity. At June 30, 2007, the company had about DKK1.0 billion in unused committed bank lines and DKK225.4 million in cash. Debt maturing within the next five years is not a concern, because maturities are manageable and we expect CPH to remain cash flow positive after dividend distributions. Liquidity is further supported by a modest and flexible capital expenditure program. Outlook The stable outlook reflects our expectation that CPH will maintain its strong competitive position and focus on growth of internal cash flow generation. Free cash flow generation is expected to continue, but is unlikely to result in significant early debt repayments given our expectation that the company will use the cash for dividend payments and capital spending. Any capital return to shareholders will limit rating upside. Major industry events causing a consistent passenger volume decline or a significant deterioration in SAS’ operations could pressure the rating, as could a further increase in leverage. ■ NOVEMBER 2007 ■ 85
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November 2007 Infrastructure Financ
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CONTENTS Introduction STANDARD & PO
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INTRODUCTION 2007: New Challenges A
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ject Finance Rating Distribution: I
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COMMENTARY Publication Date: Sept.
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(Bil. ) 140 120 100 80 60 40 20 0 F
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UTILITIES EUROPEAN UTILITIES Once a
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UTILITIES approach to ownership unb
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UTILITIES 16 ■ NOVEMBER 2007 tran
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UTILITIES 18 ■ NOVEMBER 2007 Limi
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UTILITIES 20 ■ NOVEMBER 2007 •
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Publication Date: osenergoatom (sta
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UTILITIES 24 ■ NOVEMBER 2007 Tabl
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UTILITIES 26 ■ NOVEMBER 2007 supp
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UTILITIES 28 ■ NOVEMBER 2007 pres
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UTILITIES 30 ■ NOVEMBER 2007 Tabl
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UTILITIES 32 ■ NOVEMBER 2007 The
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PROJECT FINANCE/PUBLIC-PRIVATE PART
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RATINGS LIST RATINGS LIST Utilities
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RATINGS LIST Transportation Infrast
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RATINGS LIST Project Finance Name I
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CONTACTS KEY ANALYTICAL CONTACTS Fr
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ARGENTINA AUSTRALIA BRAZIL CANADA C
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