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TEXT-S&P cuts Sanef to 'BBB', keeps on watch negative
May 30, 2012 / 4:23 PM / 6 years ago

TEXT-S&P cuts Sanef to 'BBB', keeps on watch negative

Overview	
     -- We have lowered our long-term corporate credit rating on Spain-based 	
infrastructure operator Abertis Infraestructuras S.A. (Abertis) to
'BBB' from 'BBB+' due to the weakening of its business risk profile.  	
     -- We equalize our long-term rating on French toll road operator Sanef 	
with that on its parent, Abertis, reflecting the strategic importance of Sanef 	
for Abertis.	
     -- We are therefore lowering our long-term corporate credit and issue 	
ratings on Sanef to 'BBB'. 	
     -- The CreditWatch negative placement primarily reflects our view of the 	
ongoing risk that we could lower our ratings on Sanef by one notch if we take 	
a similar rating action on Abertis. 	
	
Rating Action	
On May 30, 2012, Standard & Poor's Ratings Services lowered its long-term 	
corporate credit and issue ratings on French toll road operator Sanef to 'BBB' 	
from 'BBB+'. 	
	
We are keeping our 'BBB/A-2' long- and short-term corporate credit ratings and 	
'BBB' issue rating on Sanef on CreditWatch with negative implications, where 	
they were originally placed on April 30, 2012.	
	
Rationale	
The rating actions follow our downgrade of Sanef's controlling shareholder, 	
Spanish infrastructure operator Abertis Infraestructuras S.A. (Abertis; 	
BBB/Watch Neg/--), (see "Abertis Infraestructuras Downgraded To 'BBB' 	
Following Downward Revision Of Business Risk Profile; CreditWatch Negative," 	
published earlier today on RatingsDirect on the Global Credit Portal). 	
	
The long-term corporate credit rating on Sanef is equalized with that on 	
Abertis. The equalization reflects our view that Abertis would provide timely 	
and sufficient extraordinary support to Sanef in the event of financial 	
distress. This support stems from Sanef's strategic importance for Abertis and 	
Sanef's large contribution, through intermediate holding company Holding 	
d'Infrastructures de Transport S.A.S. (HIT; not rated), to Abertis' 	
consolidated revenues and cash flows. In 2011, Sanef's revenues and EBITDA 	
represented more than 38% of Abertis' revenues and EBITDA on a fully 	
consolidated basis, and about 25% on a proportionate basis.	
	
Disregarding our expectation of support from Abertis, we assess Sanef's 	
stand-alone credit profile (SACP) at 'bbb-'. The SACP reflects our view of 	
Sanef's "excellent" business risk profile, tempered by its "aggressive" 	
financial risk profile. Our assessment of Sanef's financial risk profile 	
incorporates the leverage of its parent company, HIT. This is because HIT 	
relies on its sole asset, Sanef, to service its debt.	
	
Sanef operates the third-largest interconnected toll road network in France. 	
Although the company is exposed to variations in traffic volumes, it benefits 	
from a strong competitive position; favorable concession agreements, including 	
yearly inflation-linked tariff increases; high profitability, and positive 	
free cash flows. We consider the risk of acquisitions and diversification to 	
be low. These strengths are partly offset by Sanef's high indebtedness, and 	
its relatively rigid dividend policy.	
	
	
Liquidity	
We view Sanef's liquidity as "strong" under our criteria. We estimate that 	
sources of liquidity for the 12 months to Dec. 31, 2012, will cover uses of 	
liquidity by about 2.9x, and that coverage will remain above 1x in the 	
following year. 	
	
We estimate liquidity sources over the period of about EUR2.2 billion. These 	
include:	
     -- About EUR170 billion of unrestricted cash and short-term liquid 	
investments;	
     -- EUR400 million notes issued in March 2012 maturing in 2018;	
     -- EUR575 billion of cash flow from operations in 2012; and	
     -- About EUR970 million available under bank lines that expire after Dec. 	
31, 2012. 	
	
We anticipate that liquidity needs will be about EUR750 million over the period,	
comprising:	
     -- About EUR300 million of debt maturities; and	
     -- About EUR450 million of capital spending, financing costs, and dividend 	
payments.	
	
Sanef expects that it will maintain adequate headroom under its financial 	
covenants. Following repayment of the loans maturing in 2013, HIT's financing 	
arrangements no longer include any financial covenants.	
	
CreditWatch 	
The CreditWatch negative placement primarily reflects the ongoing risk that we 	
could lower our ratings on Sanef by one notch if we take a similar rating 	
action on Abertis. We therefore aim to resolve the CreditWatch placement on 	
Sanef at the same time as we resolve the CreditWatch placement on Abertis. Our 	
policy is to resolve CreditWatch placements within 90 days, although we will 	
attempt to resolve them sooner, if possible.	
	
We anticipate that our ratings on Sanef will evolve in line with those on 	
Abertis. 	
	
Related Criteria And Research	
	
All articles listed below are available on RatingsDirect on the Global Credit 	
Portal, unless otherwise stated.	
     -- Methodology: Short-Term/Long-Term Ratings Linkage Criteria for 	
Corporate and Sovereign Issuers, May 15, 2012 	
     -- Methodology And Assumptions: Liquidity Descriptors For Global 	
Corporate Issuers, Sept. 28, 2011 	
     -- General Criteria: Nonsovereign Ratings That Exceed EMU Sovereign 	
Ratings: Methodology And Assumptions, June 14, 2011 	
     -- Principles Of Credit Ratings, Feb. 16, 2011 	
     -- Stand-Alone Credit Profiles: One Component Of A Rating, Oct. 1, 2010 	
     -- Criteria Methodology: Business Risk/Financial Risk Matrix Expanded, 	
May 27, 2009 	
     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 	
     -- 2008 Corporate Criteria: Ratios And Adjustments, April 15, 2008	
     -- Corporate Criteria--Parent/Subsidiary Links; General Principles; 	
Subsidiaries/Joint Ventures/Nonrecourse Projects; Finance Subsidiaries; Rating 	
Link to Parent, Oct. 28, 2004 	
     -- Abertis And French Subsidiaries Placed On Watch Neg On Downgrade Of 	
Spain And Announcement Of Possible Acquisition, April 30, 2012 	
     -- Ratings On Spain Lowered To 'BBB+/A-2' On Debt Concerns; Outlook 	
Negative, April 26, 2012 	
     -- Economic Research: No Fast Lane Out Of Europe's Recession, April 4, 	
2012 	
     -- Latin America Is Poised For Lower Growth, As Uncertainties Abound, 	
Jan. 26, 2012 	
     -- Summary: Sanef, Dec. 7, 2011 	
	
Ratings List	
Downgraded	
                                        To                  From	
Sanef	
 Corporate Credit Rating                BBB/Watch Neg/A-2   BBB+/Watch Neg/A-2	
  Senior Unsecured Debt                 BBB/Watch Neg       BBB+/Watch Neg	
	
Complete ratings information is available to subscribers of RatingsDirect on 	
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 	
by this rating action can be found on Standard & Poor's public Web site at 	
www.standardandpoors.com. Use the Ratings search box located in the left 	
column.

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