S&P raises Abertis outlook to stable vs negative; considers the protective governing structure Atlantia, ACS and Hochtief is not in danger


Santander Corporate & Investment | S&P has raised its outlook for Abertis (BBB-e, BBB n) to negative from stable, as well as that of its French subsidiary SANEF (Baa2 e, BBB- e, BBB n).

The ratings agency has taken this decision in light of the group’s solid results, with traffic levels already close to those prior to the pandemic in Europe and Latin America. S&P believes the group will be capable of continuing to generate solid cash flows, thanks to growth in traffic and indexed tariffs, con…an adjusted EBIDTA estimate of between 3.6 billion and 4.0 billion euros in 2022-2024.

S&P does not consider that the possible change in ownership of Abertis’ parent, Atlantia, puts at risk the protective structure of corporate government agreed on between Atlantia, ACS and Hochtief. It foresees that these companies will support Abertis’ strategy of replacing the sources of cash flow as concessions mature.

According to S&P, the stable outlook reflects its expectation that Abertis will have the capacity to maintain the ratio of funds from operations (FFO)/debt at over 9% in 2022-2024. At the same time, investing in replacing those concessions which expire, while the additional gearing will be mitigated by the top quality of the assets acquired. The agency warns that downward pressure on the ratings could emerge if the acquisitions financed with debt are not offset with EBITDA growth and the support of shareholders, if exposure to less predictable regulatory frameworks increases or if cash flow turns out weaker than forecast.

Research view:

To a large extent we share S&P’s view of Abertis’ improved credit profile as traffic recovers. With the sale of ASPI on the part of Atlantia, Abertis is now the main generator of revenues of the Atlantia group; it’s also a strategic asset for ACS. For that reason, it is to be hoped that both firms will collaborate in the development of Abertis as a global operator of toll motorways and remain committed with their investment grade rating. In our opinion, Abertis is still very leveraged. However, we believe that if the acquisition of Atlantia by the Benetton-Blackstone consortium is successful, Atlantia could inject its own toll motorway assets into Abertis, matched with cash from ACS, and so improving its financial profile. After the Atlantia acquisition, we also foresee that Abertis will reaffirm its strategic plan and commitment to the investment grade rating. That said, we have less faith in the shareholders’ pact, with regard to credit support, than S&P seems to indicate. We will continue to evaluate how Abertis’ credit profile progresses as it grows. Therefore, we reaffirm our Neutral stance on Abertis and, once market conditions stabilise, we see value in its hybrid bonds.