Saturday, June 09, 2007

Portuguese-Brazilian toll road consortium is placed on CreditWatch after being awarded concession for Colorado toll road

BRISA toll road operator gets negative S&P rating


New Europe
Issue 733
Copyright 2007

Standard & Poor's Ratings Services announced on June 4 that it has placed its A long-term and A-1 short-term corporate credit ratings on BRISA Auto-Estradas de Portugal S.A., the owner and operator of the Portuguese toll road network, read a press release. The agency also placed A long-term corporate credit rating on financing arm BRISA Finance B.V. on CreditWatch with negative implications.

The CreditWatch placement follows the announcement that the consortium formed by BRISA and its Brazilian subsidiary Companhia de Concessoes Rodoviarias (CCR) has been awarded the 99-year concession for the operation of the Northwest Parkway motorway, part of the ring-road network of the US city of Denver, the capital of the state of Colorado.

The associated investment is estimated at 543 million Euro, which BRISA intends to project finance. "The negative CreditWatch implications reflect our concerns that Brisa might pursue a more aggressive investment strategy in the future, given the limited growth potential in Portugal," Standard & Poor's credit analyst Jose Ramon Abos was quoted as saying.

It was noted that the ratings on BRISA have been under pressure over the past year, due to uncertainty about the recovery of traffic levels on the company's motorway network.

Abos added that a deterioration of BRISA's business profile or the company's failure to meet the target ratios indicated by S&P in November 2006 could lead to a downgrade.

S&P expects to resolve the CreditWatch status over the next three-four weeks, after having met with BRISA's management to evaluate its strategy regarding this concession and potential future ones, as well as the related financial impact on the company's debt sustainability, the release read.

The ratings are supported by the group's strong franchise, which includes the only interconnected toll motorway network in the Republic of Portugal (AA-/Stable/A-1+). Historically, strong operating cash flows, protection against inflation through a toll escalation mechanism and a supportive concession framework have also been positive factors. These strengths are offset by exposure to traffic volume risk and competition from parallel roads that remain toll-free.

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