S&P Places PYCSA Bnds on CreditWatch Neg
13 September 2000
S&P Places PYCSA Bnds on CreditWatch Neg
NEW YORK--Standard & Poor's--Sept. 13, 2000-- Standard & Poor's today placed PYCSA Panama S.A.'s $131 million senior secured bonds due 2012 on CreditWatch Negative.The CreditWatch placement reflects stagnating traffic revenues in 2000 leveling off at about $1.1 million per month. This revenue shortfall may cause the toll road project to miss its next debt service payment in December 2000.
The rating could be revised shortly, pending the findings of an upcoming meeting with management.
The rating reflects the following credit weaknesses:
| -- | Traffic volumes are well below initial forecasts. Actual revenues for 1998 and 1999 are about 65% lower than originally forecast. |
| -- | The project's inability in 1999 and 2000 to service debt from operating cash flow. |
| -- | The need for continued robust growth in traffic volumes and revenues to achieve financial pro forma targets, as debt service rises over time. |
| -- | Dependence on continued economic growth and political stability in the Republic of Panama. |
| -- | The limited financial strength of the sponsor and its related parent and affiliate companies. The project still benefits from: |
| -- | Heavy traffic congestion on existing roadways and demonstrated significant time-savings available to users of the toll road. |
| -- | Traffic projections that appear reasonable over the long term. |
| -- | Effective toll-rate-setting mechanism that adjusts rates for changes in inflation and exchange rates without further government approval. |
| -- | Completed construction. The Northern Corridor segment was completed in January 1998 and the Madden segment in May 1999. |
| -- | The inability to distribute funds to equity holders until the average debt service coverage ratio for the prior four quarters exceeds 1.35 times. |
PYCSA Panama's failure to realize forecast revenues has eroded debt servicing capability. The project relied on releases from construction contingency and debt service reserves to meet debt service during 1999 and 2000.
Traffic volumes are well below original forecasts due principally to the following issues:
-- Access to the roads has been impeded by the Ministry of Public
Works' (MOP) institution of directional lane changes on
competing free roads during rush hours, and reliance on manual
traffic control, which slows access to the toll road from
central Panama City.
-- Drivers are more reluctant to pay the toll than originally
forecast. Additionally, truck traffic has not materialized due
to delays in the installation of the transponder system.
-- Delayed completion of the Madden segment reduced the volume of
riders using both the Northern corridor and projected revenues
from the Madden segment.
PYCSA Panama has reported to Standard & Poor's on its efforts to improve flow and revenues, including completion of the transponder system, toll restructuring, and coordination with the MOP to manage the problems regarding access to the toll road. If realized, these actions should further increase traffic volumes.
PYCSA Panama, wholly owned by Grupo PYCSA, issued the bonds to finance a portion of the cost to construct the 8.1-mile Northern Corridor and 10.1-mile Madden segment tolls roads in and near Panama City. PYCSA Panama, operates under a 30-year concession. Constructora Vial, wholly owned by Grupo PYCSA, completed the Northern Corridor in early 1998, but did not complete the Via Madden until May 1999, 11 months behind the originally scheduled completion date of July 1, 1998 due to delays in obtaining permits, the receipt of new heavy equipment and rainy weather. Autovias, wholly owned by Grupo PYCSA, operates the roads under a long-term agreement, Standard & Poor's said.---CreditWire