Fitch: Moderate Impact from Sias' Overseas Expansion

OREANDA-NEWS. Fitch Ratings says it does not expect Sias S.p.A. (BBB+/Stable) investment in Brazilian toll road concessionaire Ecorodovias to have a significant impact on group leverage. The investment comes at a time when visibility on the maturity extension of Sias' core Italian toll road concessions remains low.

On 18 December 2015, Sias and its parent company ASTM signed an agreement with CR Almeida S.A. Engenharia e Costrucoes (CR Almeida) to jointly control and co-manage two controlling stakes in Ecorodovias (64%) and Vem ABC (55%). Ecorodovias, the main asset of the transaction, is the third-largest Brazilian toll road operator managing a network of 1,860km under eight long-term concession agreements.

Under the agreement, CR Almeida will contribute its stakes in Ecorodovias and Vem ABC together with a financial debt of BRL2,571m (approximately EUR612m) to a newly established SPV. Sias and ASTM will inject EUR529m of equity in the SPV in exchange for a 64.1% stake, while CR Almeida will hold the remaining 35.9%. Equity split between Sias and ASTM is still under discussion, although we understand from management that Sias' investments will not exceed 50% of the total equity injection in the SPV. According to our preliminary calculations, the impact on Sias' consolidated leverage should be moderate, with Fitch-adjusted leverage under the rating case increasing to 3.4x in 2016 (from 3.2x) or to 3.9x if the Centropane concession (A21) is awarded to Sias Group.

The agreement will provide Sias with exposure to developing, albeit volatile, emerging market toll road infrastructure at a time when Sias' operations in the mature Italian toll road sector is stalled by regulatory uncertainties.

In 2015, Sias and the Italian Ministry of Infrastructure (the grantor) agreed to cap tariff hikes to 1.5%, pending the approval of a new plan aimed at merging and extending its eight Italian toll road concessions in exchange for higher investments and tariff caps. Pending negotiation on such a new plan, the grantor has put on hold the approval of most of Sias' single-concessions business plans. We understand from Sias that discussions with the grantor are still ongoing.

Fitch expects to update its rating case over the next few weeks when a full update of Sias' business plan is available. The review will also focus on the status of negotiations with the grantor on the potential maturity extension of Sias' short-dated Italian concessions.