Amount and Funding of the Transaction Would Be Key
CRIF Ratings (CRIF) says that a potential takeover on Abertis could be beneficial for ACS’ rating. Total consideration of the offer and the funding structure of the transaction will be key to determine the rating impact. On July 21st ACS published a statement announcing that the company is currently studying the possibility to make a counterbid on the Spanish toll road operator Abertis following the one presented by Atlantia in May 2017.
“This acquisition could be credit positive provided the vast majority of the transaction is funded by equity and only a minor portion with debt. In CRIF Ratings’ view, the credit profile of Abertis is stronger than ACS given its major cash flow stability and visibility derived from the toll road businesses which remains less volatile than construction”- says Borja Monforte, Head of International Operations at CRIF Ratings. However, CRIF highlights that a transaction largely funded through debt may also lead a to a rating downgrade due to the potential increase in leverage that might result no longer commensurate with ACS’ current ‘BB+’ Long Term Issuer rating. At FY16, Abertis reported EUR4.9bn of revenues and EUR3.2bn of EBITDA. The magnitude of the transaction could by higher than EUR16bn, which is the offer made by the Italian infrastructure group Atlantia in May 2017.
“The business profile improvement plus the significant and stable dividend paid by Abertis (EUR639m in FY16) would be clearly credit positive for ACS. The main rating concerns for the rating remain the likely step up in leverage and the increasing complexity of the debt structure given the large amount of non-recourse debt held by Abertis that as of December 2016 amounted to EUR11.5bn”- adds Monforte.
Current negative rating triggers for ACS include FFO leverage above 4.5x and 6.5x on a net and gross basis respectively. Abertis’ leverage on a net basis is similar to ACS (around 4.4x as of December 2016). CRIF will continue to monitor this transaction and will take a rating action upon an official announcement by ACS in this regard.
Borja Monforte, Director- Corporate Ratings
Head of International Operations
Tel: + 34. 126.96.36.199
Davide Tommaso, Associate- Corporate Ratings
Tel: +39.051 417.6874