European Infrastructure Finance Yearbook - Investing In Bonds ...

Publication Date:
June 7, 2007
Issuer Credit Rating:
A/Negative/A-1
Primary Credit Analyst:
Alexandre de Lestrange,
Paris,
(33) 1-4420-7316
Secondary Credit Analyst:
Lidia Polakovic,
London,
(44) 20-7176-3985
SANEF
Rationale
The ratings on Sanef are equalized with those on
Abertis Infraestructuras S.A. (A/Negative/--).
Following its privatization, Sanef is controlled by
Abertis through 52.6%-owned Holding
d’Infrastructures de Transport S.A.S. (HIT;
A/Negative/--), the intermediary vehicle that
acquired Sanef.
The rating on Abertis reflects the company’s
excellent business profile, with strong and stable
cash flow generation derived largely from its tollroad
concession business, a supportive regulatory
framework both in Spain and France, and fairly
manageable future capital-expenditure needs.
These strengths are offset by Abertis’ weakened
financial profile and lack of dividend flexibility, as
well as its appetite for additional acquisitions,
which could further impair its business and
financial profile. It is important to note that
without this support, HIT and Sanef’s underlying
credit quality would be significantly weaker. On a
combined, stand-alone basis, HIT and Sanef
would have very low investment-grade ratings. If
Abertis’ continued acquisitive strategy
significantly reduces Sanef’s contribution to
Abertis’ consolidated financial profile, HIT and
Sanef could be rated one notch below Abertis.
The ratings on Sanef reflect its strong market
position as the third-largest interconnected tollroad
network across key economic and tourist
corridors in France, supportive concession
agreements, high profitability, and increasing
positive free cash flow generation. These strengths
are offset by Sanef’s exposure to traffic risk, a
weakened financial profile following its
acquisition by HIT--particularly when HIT’s debt
is factored in--and aggressive dividend payout to
HIT limiting debt burden curtailment and
exposing lenders to substantial refinancing risk.
In the financial year ended Dec. 31, 2006,
Sanef’s consolidated EBITDA amounted to €809
million, up 8.6% on 2005. EBITDA essentially
derived from toll revenues, which grew 6% in
2006, and should continue to represent 90% or
more of revenues over the medium term. The
unadjusted EBITDA margin increased to 66%.
Consolidated HIT and Sanef net debt peaked at
about €6.8 billion (excluding Sanef’s debt
revaluation following acquisition), in line with
expectations, at year-end 2006. With a
STANDARD & POOR’S EUROPEAN INFRASTRUCTURE FINANCE YEARBOOK
TRANSPORTATION INFRASTRUCTURE
consolidated net-debt-to-EBITDA ratio of 8.7x,
the companies were still comfortably complying
with the consolidated covenants at HIT’s level
(maximum ratio of 10.5x) at year-end 2006.
Based on the consolidated covenants at the HIT
level, leverage is expected to decrease to 6.5x at
year-end 2012. Sanef’s group net debt at 5.2x
EBITDA at year-end 2006 is still well below the
threshold of 7.0x set by Caisse Nationale des
Autoroutes (AAA/Stable/--).
Liquidity
Sanef’s liquidity is satisfactory, owing to steady
cash flow generation stemming from the tollroad
business.
Financing needs for 2007 include some €469
million of debt maturing until Dec. 31, 2007, and
a forecast €176 million dividend payment to HIT
based on 100% payout of 2006 net income.
These were partially covered by available cash
and marketable securities of €223 million at yearend
2006 and expected positive free operating
cash flow (defined as funds from operations
{FFO} plus working capital change, minus capital
expenditures) of about €280 million in 2007,
making debt refinancing necessary.
Outlook
The negative outlook mirrors that on Abertis and
reflects mainly our concern that Abertis is now
pursuing a more aggressive acquisition strategy
following the purchase of a 32% stake in Eutelsat
Communication S.A. (BB+/Stable/B), the holding
company of Eutelsat S.A.
We expect Abertis to be able to meet the target
ratios we indicated on June 1, 2006: FFO to gross
debt of about 13%-15% and FFO interest
coverage of about 3.5x-4x. We expect Abertis to
approach the lower end of these ranges over the
next two years, and to make continued
improvements toward the higher end of the
ranges thereafter.
Abertis does not have headroom for further
debt-financed acquisitions at the current rating
level. A stronger-than-originally-expected financial
performance could lead to a revision of the
outlook to stable on Abertis, and therefore on
Sanef and HIT. ■
NOVEMBER 2007 ■ 89