S&P slashes Rutas de Lima

S&P said it downgraded Rutas de Lima SAC’s (RdL) debt rating to B- from BB- and placed the rating on CreditWatch with negative implications.

The Metropolitan Municipality of Lima officially notified Rutas de Lima it will end the concession agreement, alleging acts of corruption, high tariffs due to illegal amendments to the agreement, severe irregularities in the agreement and the cost of the Chillon tolls on low-income families, who use between 9% and 15% of their monthly income to pay for these tolls among other reasons. The concession will end on July 29; 180 days after the notification, which will trigger an event of default on RdL’s notes.

On Feb. 1, RdL filed legal action against the municipality to start the dispute resolution process. If a resolution isn’t reached, the claim will go to the International Centre for Settlement of Investment Disputes. S&P noted that RdL has won all its disputes with the municipality over toll collection suspension and opposition to tariff increases. However, the arbitration process could take longer than 90 days and be issued after the concession is terminated on July 29.

“The CreditWatch negative reflects a 50% chance of a further downgrade in the next 90 days if we perceive higher risk of acceleration of notes repayment, or if the project faces further adverse operating conditions that could hamper its cash flow, leading to a DSCR below 1x in 2023 and onward,” S&P said in a press release.

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