Fitch Affirms Taboada Finance Limited Sr. Secured Notes; Outlook Stable
OREANDA-NEWS. Fitch Ratings affirms the ratings of the notes issued by Taboada Finance Limited, a special purpose company incorporated in the Cayman Islands. A full list of rating actions follows at the end of this release.
The underlying issuance is a securitization of rights to receive future payments from Servicio de Agua Potable y Alcantarillado de Lima (SEDAPAL), the Peruvian state-owned water utility company for the districts of Lima and Callao. Payment rights, in the form of Retribucion por Inversiones (RPIs), are related to the construction of Planta de Tratamiento de Aguas Residuales Taboada (Taboada), a wastewater treatment plant, by ACS Servicios, Comunicaciones y Energia S.L. (ACS). ACS is the primary sponsor of the transaction through its local concessionaire, Planta de Tratamiento de Aguas Residuales Taboada S.A. (PTAR Taboada).
Repayment of the notes is supported by a contingent guarantee of the government of Peru (GOP) through the Ministry of Housing, Construction and Sanitation (MVCS) to provide for any debt service shortfalls.
KEY RATING DRIVERS
-- Reliance on Sovereign Contingent Guarantee: While the transaction benefits from project collections, the rating relies on a sovereign's contingent guarantee on the RPI payments given SEDAPAL's ability to issue more debt from its master trust without rating agency affirmation as long as the minimum debt service coverage ratio (DSCR) is 1.1x. The GOP will guarantee the RPI payments related to the construction of the Taboada project if water utility bill payments received by SEDAPAL through the banking system are not sufficient to cover debt service.
-- Strength of the Government Obligation: The guarantee backing the RPI payments from SEDAPAL is considered an irrevocable and unconditional obligation of the GOP denominated in Nuevos Soles. This obligation is included in the GOP's multiyear budgetary projections with established history and legislative acceptance. Unlike CRPAOS, this is a contingent obligation which is governed by Peruvian law, and does not cross-default with other RPIs. GOP has made all payments on a timely basis since 2008 when they were first used to finance infrastructure projects.
To determine the strength of the government obligation and its one-notch deviation from the Local Currency (LC) Issuer Default Rating (IDR), Fitch incorporates perspectives from its sovereign group and determined that the credit quality of the obligation is commensurate with the ratings of the transactions.
-- No Exposure to Construction/Performance Risks: Government contingent guarantee backing the RPI payments is not subject to the completion of further milestones or performance of the project. As of February 2014, all of the CAOs related to the construction of the project have been recognized.
-- Rating Linked to Sovereign LC IDR: GOP's guarantee is denominated in Peruvian Nuevos Soles, thus the rating reflects the likelihood of the sovereign paying such obligation in local currency, On Sept. 30, 2015, Fitch affirmed Peru's long-term LC IDR at 'A-'; Stable Outlook.
-- Adequate Liquidity: The transaction structure includes additional liquidity through (i) a debt service reserve account and (ii) an inflation reserve account, funded with the note proceeds on the closing date, to help mitigate liquidity risks and to cover IPM/IPC mismatches. As of June 2015, outstanding balance of the reserve accounts within the issuer were approximately S/. 60,758,692.38 (vs S/.61.5 million during 2013).
The ratings on the transaction are subject to changes in Peru's long-term LC IDR.
DUE DILIGENCE USAGE
No third-party due diligence was provided to or reviewed by Fitch in relation to this rating action.
Fitch has affirmed the following ratings:
--Series 2011-1 S/. 572,089,000 notes due 2029 at 'BBB+';
--Series 2011-2 S/. 220,250,000 notes due 2033 at 'BBB+';
--Series 2011-3 S/. 59,133,000 notes at 'BBB+.
The Rating Outlook is Stable.