Fitch Affirms Azienda Sviluppo e Mobilita at 'BBB'; Outlook Stable
OREANDA-NEWS. Fitch Ratings has affirmed Italian Azienda Sviluppo e Mobilita S.p.a.'s (ASAM) Long-term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'BBB' with a Stable Outlook, and its Short-term Foreign-Currency IDR at 'F3'.
The affirmation of ASAM's ratings reflects Fitch's expectation of timely ordinary and extraordinary support from its ultimate sponsor, the Region of Lombardy, which exercises indirect control and oversight through its financial arm, Finlombarda Spa. The Stable Outlook reflects our expectation that ASAM will have sufficient funding through the combination of internal and external resources during the law-mandated ownership tenure by the Region of Lombardy.
Our top-down rating approach reflects the application of our criteria for Rating of Public-Sector Entities Outside the United States, due to the credit link between ASAM and its sponsor.
ASAM is a holding company 99.9% controlled by the Region of Lombardy and whose core asset is majority ownership of Milano Serravalle (MSMT: BB+/Negative), a key motorway of the Milan-Lombardy area, which is also engaged in the EUR5bn greenfield, and financially strained Autostrada Pedemontana project.
KEY RATING DRIVERS
Legal Status (Mid-range)
Formerly a subsidiary of the now-defunct Province of Milan but then under the control of the Metropolitan City of Milan (BBB+/Stable), ASAM's shares were transferred to the Region of Lombardy in 2014 by law and at no cost. The region was originally to return them to Milan by end-2016, but this has been postponed to end-2018, extending the region's full control of the company, although not indefinitely.
ASAM is not consolidated into the accounts of its direct shareholder Finlombarda and it does not represent a material portion of the revenue of the Region of Lombardy. However, it has received a comfort letter from the region regarding EUR100m syndicated bank facility due 2021, and conditional upon the region's continued ownership
ASAM's financial profile is highly volatile as it depends on dividend distributions from MSMT, which have been absent in the past two years. This makes ASAM's financial viability heavily reliant on the region's support.
MSMT expects to pay an estimated EUR12m annual dividend from 2017, which should translate into an around EUR6.3m inflow based on ASAM's 52.9% share of MSMT. This should partially fund around EUR12m annual cash calls from debt servicing, with the shortfall funded by the Region of Lombardy through a EUR20m facility, which is EUR8m drawn.
The region exercises extensive control over ASAM through the mandate given to Finlombarda, which plays a key role in all operational decisions and appointment of MSMT's board members. Fitch expects continued strong control and oversight from Finlombarda over ASAM's activities and those of its subsidiaries, including approval of ASAM's financial statements.
Strategic Importance (Mid-range)
ASAM, as custodian of the Region of Lombardy's interest in MSMT, is of key importance to the region's administration due to the strategic importance of the public infrastructure toll-road project. Fitch expects the motorway projects to continue to play a key role in the region, even if ASAM's ownership changes over time.
ASAM's ratings are credit-linked to those of the Region of Lombardy and therefore would reflect any change in the region's creditworthiness. ASAM's ratings could also be downgraded should its strategic importance to its ultimate sponsor wane, including through rising uncertainties about ownership as the 2018 ownership deadline approaches, leading to weaker financial support.
An upgrade may result from the region issuing a full guarantee on all of ASAM's financial liabilities, although this is unlikely.
ASAM's ratings are sensitive to a number of assumptions. Fitch assumes that the Region of Lombardy will maintain control of ASAM during its temporary ownership, monitor its debt repayment schedule and provide timely financial support to the company as needed.