Moody’s rates ViaOeste debentures Ba2

Moody's Investors Service said it assigned a Ba2 global scale rating and an Aa1.br national scale rating to the R$270 million senior unsecured debentures due in 2021 to be issued by Concessionaria de Rodovias do Oeste de Sao Paulo - ViaOeste SA.

ViaOeste's issuer rating is unchanged at Ba2, along with its senior unsecured ratings at Aa1.br.

The proceeds from the issuance will be used to cover capital investments, Moody’s said.

The outlook is negative.

The debentures will benefit from a conditional corporate guarantee from ViaOeste’s parent company, CCR SA, which will cover the early termination of the concession contract, Moody’s said.

CCR and the state of Sao Paulo are disputing a 2006 decision by the state’s regulator to extend the life of the company's concession from 2018 to 2022, the agency explained.

Moody's said it does not expect changes to the documentation reviewed over this period nor does it anticipate changes in the main conditions that the debentures will carry.

The increase in debt from the issuance will result in a reduction of the company's funds from operations-to-debt on a pro forma basis to about 43% from 56% as of the end of June 2016, the agency said.

The ratings are supported by the strong asset features of the company's concession, which includes one of the busiest highways in an economically robust and populous area in the state of Sao Paulo, along with a solid track record of high traffic volumes and balanced traffic profile, Moody’s said.

The negative outlook is in line with the sovereign's outlook given the domestic nature of the company's operations, the agency said, and uncertainties relative to the extension of the company's concession beyond 2018.

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