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TEXT-Fitch rates LLX Acu Operacoes Portuarias 'BBB+(bra)'
September 17, 2012 / 2:37 PM / 5 years ago

TEXT-Fitch rates LLX Acu Operacoes Portuarias 'BBB+(bra)'

Sept 17 - Fitch Ratings has assigned a National Rating of 'BBB+(bra)' to the
debt issuance of LLX Acu Operacoes Portuarias S.A. (LLX Acu), in the amount of
BRL750 million, with final maturity within 15 years. The Rating Outlook is
Stable.

RATING RATIONALE

The strategic relevance of LLX Acu partially mitigates the volume risk. Due to
the continued growth of the Gross Domestic Product (GDP) and the bottlenecks in
the existing ports, Brazil has been facing increasing demand for new port
infrastructure. In view of its geographic location, size and adequate intermodal
capacity, in addition to easy access from the countryside, Fitch believes that
LLX Acu's Porto do ACU project should be able to provide assistance to the
operations of the companies of Group EBX, and efficiently meet local demand. The
proximity of Porto do Acu to oil reserves and iron ore mining areas, the main
products it will be handling, benefits its competitiveness, along the fact that
73% of GDP and 75% of the country's exports are generated in this region. Tax
benefits, for example, related to the Tax on Distribution of Goods and Services
(ICMS; a value-added sales tax), which was reduced from 18% to 2%, can also
attract new industries to the port region, thus diversifying the tenant
concentration.

The port's operational structure and private nature minimize the price risk.
Although only 42% of the leasing revenues for the next couple of years have
already been contracted, the project's operational structure, in which leased
areas should represent approximately 50% of total revenues, reduces the
uncertainty as to the long-term revenue stream. Those long-term contracts that
have already been signed will have lease prices adjusted by local inflation,
same as the Memorandums of Understanding (MOUs) will be during the advanced
stages of the negotiation. In addition, because it is a private port, load
handling prices will not be subject to third party approval, being stipulated at
competitive levels that compare to other ports of the region. This situation,
together with project competitive advantages, contributes to reduce revenue
volatility in the future.

EXPECTATION OF FINANCIAL SUPPORT FROM MAJOR SHAREHOLDER

Over the short term, the project's financial feasibility relies on capital
injections from LLX Logistica S.A. and Centennial Acu shareholders. Fitch
believes that the project holds strong links with all companies of Group EBX and
with its main shareholder, who expressed his formal commitment to support the
project. Porto do Acu should become a strategic asset which will facilitate the
operation and logistics of other group companies. This, combined with the track
record of financial support to group companies from the main shareholders
through capital injections and with the risk to their reputation in not doing
so, makes such financial support probable, in Fitch's opinion.

INITIAL STAGE OF CONSTRUCTION COULD MEAN COMPLETION RISKS

At the end of August 2012, the completion of LLX Acu project had advanced 20% in
relation to its scope, as established by the independent engineer. The remainder
should be concluded by the end of 2014. Total investments should reach BRL2.9
billion. Being in the initial stages of the construction process represents a
risk in terms of the impact that any eventual cost overruns and construction
delays may have on the financial profile of the project. Nevertheless, the
rating incorporates the fact that LLX Acu has signed most of its construction
contracts at fixed prices, with a 10% contingency in the capital budget, which
partially offsets the risk of overruns. In addition, there is an independent
engineer report confirming project feasibility.

DEBT PROFILE SHOULD IMPROVE

The rating incorporates the expectations that the company will be able to
improve its debt profile. LLX Acu is currently negotiating the lengthening of
its loan tenors with Banco Bradesco de Investimento S.A. (BBI) and new long-term
debt with Banco Nacional de Desenvolvimento Economico e Social (BNDES). This
financing should be used to refinance the outstanding balance of bridge-loans in
the amount of BRL518 million. Such transactions should significantly improve LLX
Acu's debt profile and current liquidity position, making the project capital
structure more compatible with the long-term project. Although the debt
percentage at fixed rates is low, as compared to the current and expected debt,
the new expected debt will have lower costs and longer terms, which should also
improve its debt profile. In addition, dividends can only be distributed if
covenants are met, for example, debt service coverage ratio (DSCR) higher than
1.3x.

PRESENCE OF REFINANCING RISK OVER THE LONG TERM

According to the assumptions of Fitch's rating scenario, the DSCRs suggest
refinancing risk over the long term. Despite this, the revenue stream to be
obtained as soon as the project passes the start-up period, such as from the low
cost structure present in the operational model, would allow the project to
record low-to-moderate leverage during the years under analysis (ie, from 2012
to 2026), which should facilitate the debt refinancing process, if necessary. In
addition, there is a guarantee of minimum expected revenue, in view of the
long-term leasing contracts, of 56% of the revenues and average net debt/EBITDA
of 1.3x during the credit period under analysis. According to Fitch's
calculations, the minimum DSCR is 0.79x, while the median is 1.95x.

KEY RATING DRIVERS

LLX Acu's rating could be affected in case of:
--Debt profile substantially different from expectations;
--Significant construction delays which postpone the generation of forecast
revenues;
--Variations in the occupation rate expected from the leases;
--Significant increase of operating and maintenance costs in relation to
projected levels.

GUARANTEES

The debentures are senior unsecured obligations of the issuer, guaranteed by LLX
Logistica S.A. and by the main shareholder of Group EBX, Eike Batista.

TRANSACTION SUMMARY

The debentures were issued by LLX Acu, a specific purpose vehicle (SPV) created
to operate and construct the Acu port. The issuer expects to issue BRL750
million, with expected maturity in 2027.

LLX Acu is a private mixed-use port terminal, belonging to the Acu Superport
complex, in the state of Rio de Janeiro. According to the projections, proceeds
from the issuance should be used to finance future investments.

The operations of LLX Acu S.A. port are in the pre-operational stage. The port
has been in construction since October 2007 and is expected to start-up,
partially, by mid-2013. When the construction is completed, the port will have a
17km wharf, up to 40 port-berths, with capacity to receive large-sized vessels
(including Chinamax), thanks to its 26-meter draught.

The Acu port (which is composed of the special purpose companies: LLX Minas-Rio
and LLX Acu) and the industrial park will be the largest private port with
industrial facilities in Latin America, covering an area of 13,212 hectares, and
is projected to become one of the busiest ports worldwide, in terms of tonnage
of handled cargo. With a total investment of BRL4.1 billion, the two-terminal
project, will handle iron ore, oil, steel products, coal and other bulk liquids
and solids. Its private nature will not offer tail risk, and the only reliance
on governmental entities, other than the political risk, is related to the risks
of land acquisition and environmental licenses. Although, by being a private
port, it is not necessary to pay concession fees and only a few union costs, LLX
Acu pays a few fees to the government to be allowed to operate.

The amount of refinancing risk can be financed with capital injections from the
shareholders, or from LLX Logistica S.A. (the holding company of LLX Acu), whose
cash and marketable securities in June 2012 reached BRL402 million, or by
additional loans. Fitch has tested the capital and debt and believes that LLX
Acu is in good condition to pay its debt throughout the years.

Additional information available at 'www.fitchratings.com' or
'www.fitchratings.com.br'. The above ratings were solicited by, or on behalf of
the issuer, and therefore, Fitch has been compensated for the rating assessment.

Applicable Criteria and Related Research:

-- Rating Criteria for Infrastructure and Project Finance, July 11, 2012.
-- Rating Criteria for Ports, Sept. 29, 2011.

Applicable Criteria and Related Research:
Rating Criteria for Ports
Rating Criteria for Infrastructure and Project Finance

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