OREANDA-NEWS. Fitch Ratings has affirmed the international and national scale ratings of ENA Sur Trust's USD395 million senior secured notes at 'BBB' and 'AAA(pan)'. The Rating Outlook remains Stable.

Rationale
The affirmation of the senior notes is based on the strong operational performance of the project including traffic levels above base case projections, moderate expenses and consistent infrastructure renewal. While relatively high, leverage continues to decrease as a result of the strong revenues and the pass-through cash flow structure.

KEY RATING DRIVERS
--Limited volume risk: Corredor Sur is a critical link for commuters and commercial traffic with limited competition from viable free alternatives. While the project was originally dependent on traffic volume increases, growth to date has been above Fitch's base-case expectations and break even volume levels are now negative. The road connects Panama City's international airport in Tocumen to the Central Business District (CBD) with its high concentration of employment and commercial activities. Revenue Risk: Volume - Stronger.

--Moderate price risk: ENA Sur is authorized to increase toll rates for inflation on an annual basis, subject to government review. Additionally, toll rates are structurally protected by a covenant that prohibits reductions if the debt service coverage ratio (DSCR) does not meet a minimum threshold. This structural feature partially mitigates price and political risks. Revenue Risk - Price: Midrange.

--Suitable infrastructure plan: Sound contractual requirements to fund capital expenditure costs are in place. The road is maintained in adequate condition, while a moderate and inclusive maintenance plan is in place to repair/maintain certain sections requiring major investment. The capital investment program (CIP) is primarily internally funded. Biannual inspections are performed to ensure the asset is maintained as required. Infrastructure Development/Renewal - Midrange.

--Conservative debt structure: ENA Sur Trust's debt carries fixed interest rates and a fully amortizing profile. The class A notes have scheduled principal payments while the class B notes feature a pass-through amortization scheme (zero flow). Liquidity in the structure is provided via a six-month debt service reserve account and a major maintenance reserve account. Distributions are prohibited prior to payment in full of the class B notes and then only when the average DSCR for the prior 12 months is 1.30x or greater. Debt Structure - Stronger.

--Adequate debt service: Leverage remains somewhat elevated at 6.1x net debt-to-EBITDA; however, the project has no foreseeable additional debt needs and an adequate liquidity cushion. The project generates sufficient revenues to maintain coverage ratios consistent with its rating category with minimum loan life coverage ratios (LLCR) of 1.68x and 1.38x under the base- and rating-case scenarios, respectively. Minimum mandatory DSCR under the rating case scenario is 1.79x.

Peer Analysis: The transaction's leverage compares favorably with its Panamanian peers (ENA Norte Trust, rated 'BBB'/ 'AAA(pan)' by Fitch; Outlook Stable and Fideicomiso ENA Este, rated 'BBB-'/'AA+(pan)'; Outlook Stable), which have net debt-to-EBITDA ratios of over 10x. Additionally, revenues per mile are USD5 million for ENA Sur versus USD3.5 million for ENA Norte. ENA Este's lower rating partially reflects reliance on excess cash flows from ENA Sur following payment of the Class B notes.

RATING SENSITIVITIES
--Negative: Sustained material traffic underperformance; O&M and renewal and replacement expenses materially above expectations that cause financial flexibility to be reduced;
--Positive: Traffic and revenue performance in line with sponsor case, and continued reductions in leverage, improving financial metrics and flexibility.

CREDIT UPDATE
Traffic levels grew modestly for the project in 2014 with tolled traffic increasing by 0.8% and revenue increasing by 0.5%. This compares favorably to the 5% and 7% declines considered in Fitch's base and rating cases for 2014. The loss in volume was expected due to the completion of free North-South bypasses connecting ENA Sur and ENA Norte, the expected completion of the ENA Este extension now expected in the fourth quarter of 2015, and the completion of the Panama City Metro Line 1 in April 2014.

Project expenses increased in 2014 to $13.8 million, up 11.3% from the prior year primarily due to the expenses related to the implementation of the Panapass electronic tolling system completed earlier this year. The system is expected to significantly improve the traffic flow at toll booths as drivers no longer need to scan proximity cards and also do not have the option to recharge balances.

Following the completion of the ENA Este project in the fourth quarter of 2015, ENA is expected to seek an updated traffic study to analyze the impact of the completion of the ring road and the implications of other infrastructure projects recently completed or in various stages of planning and construction. Fitch considers this report key in understanding the dynamics of the traffic flow in the city's changing transportation backdrop.

The macroeconomic health of the country is supported by Fitch's view of the Panamanian sovereign. The country's rating was affirmed at 'BBB' with a Country Ceiling of 'A' in February 2015. Economic growth in Panama is expected to average 6% in 2014-2015; the highest in the 'BBB' category. This is a decline from double digit growth in more recent years and is reflective of investment projects coming to fruition in the country.

Corredor Sur extends over 19.8 kilometers (approximately 12.3 miles) connecting Panama City's international airport (in the East) to the CBD (in the West). ENA Sur operates the toll road concession of Corredor Sur, and has no other significant commercial activities. Empresa Nacional de Autopistas holds 100% of ENA Sur's shares.