Lima Airport Partners SRL 'BBB' Debt Rating Affirmed, Outlook Remains Stable
- Peru-based airport operator LAP continues to post strong operating performance and financial metrics amid consistently rising passenger traffic, even above our expectations.
- Despite our prospects of a solid performance during the remaining term of LAP's notes, our rating is limited by our expectation that the project will incur additional debt to finance the construction of a second runway. This would result in lower-than-current debt service coverage ratio (DSCR) metrics. In addition, the financing amount and timing are currently uncertain, given that the Ministry of Transportation has yet to deliver the lands on which the second runway will be built.
- We're affirming our 'BBB' issue-level rating on the LAP's senior secured debt.
- The stable outlook reflects our view that the project's performance will remain solid in the next two years with the projected DSCR of above 2.0x. Moreover, we consider that the technical default that the project faces due to the government's failure to deliver the lands for the runway, doesn't have a credit impact because it doesn't affect LAP's cash flow available for debt service and doesn't trigger an automatic debt payment acceleration. We also believe the project's liquidity, which exceeds the total debt balance, as another mitigating factor for the technical default under the notes.
SAO PAULO (S&P Global Ratings) Nov. 21, 2016--S&P Global Ratings affirmed its 'BBB' senior secured debt rating on Lima Airport Partners SRL's (LAP's) notes due 2022. The outlook remains stable. The rating on LAP's notes reflects our expectation that the project will continue to post strong operating and financial performance during the remaining term of its notes thanks to solid traffic growth prospects (above Peru's GDP growth pace) in the next three years, and converging with long-term traffic growth in line with GDP growth during the remaining term of the notes. Moreover, we don't consider the technical default as a credit risk. Main consequences from the default is the project's inability to distribute dividends, which actually strengthens LAP's cash position. The other result is the inability to perform capital expenditures of more than $5 million, unless the noteholders approve it; in 2016, LAP conducted two such capital projects with the noteholders' consent. Moreover, even if debt payment acceleration occurs--which could only happen if LAP sends a formal notice to the Ministry of Transportation, and it doesn't cure the breach within 90 days of the receipt of such notice--the project has currently more cash in hand than the outstanding balance of the rated debt. As of September 2016, the project had about $152 million in cash, compared with the outstanding $91 million on its notes maturing in 2022. Our base-case scenario considers that LAP and the Ministry of Transportation will reach an agreement to amend the concession contract, which will cure the technical default. Following the agreement, LAP will start the preliminary works for the second runway by the second half of 2017, by which time we expect the project to receive 100% of the necessary lands. Considering the need for additional financing to build the second runway, we're now projecting LAP will incur additional debt in 2019, which would lead to DSCR of 1.35x-1.40x. However, the final amount and timing of the new issuance is currently uncertain, and the project is considering various alternatives to structure the new debt. RELATED CRITERIA AND RESEARCH Related Criteria
- Key Credit Factors For Road, Bridge, and Tunnel Project Financings , Sept. 16, 2014
- Project Finance Operations Methodology, Sept. 16, 2014
- Project Finance Transaction Structure Methodology, Sept. 16, 2014
- Project Finance Framework Methodology, Sept. 16, 2014
- Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013
- Counterparty Risk Framework Methodology And Assumptions, June 25, 2013
- Project Finance Construction And Operations Counterparty Methodology, Dec. 20, 2011
- Use Of CreditWatch And Outlooks, Sept. 14, 2009
Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com and at www.spcapitaliq.com. All ratings affected by this rating action can be found on the S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.
| Primary Credit Analyst: | Diego Weisvein, Buenos Aires (5411)48912154; diego.weisvein@spglobal.com |
| Secondary Contact: | Pablo F Lutereau, Buenos Aires (54) 114-891-2125; pablo.lutereau@spglobal.com |
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