Fitch Takes Actions on Latam Ports

Fitch Ratings has conducted a review on its ratings of Latam ports amid the current challenging scenario of the coronavirus pandemic and the expected sharp drop in volumes and revenues for this kind of assets due to transportation restrictions and a depressed economic activity. The following ratings are affected and respective actions are shown below:

–Autoridad del Canal de Panama

–Terminales Portuarios Euroandinos Paita

–Administracion Portuaria Integral de Campeche, S.A. de C.V.

For relevance purposes, this press release only includes detailed information on Autoridad del Canal de Panama and Terminales Portuarios Euroandinos Paita. For more information related to Administracion Portuaria Integral de Campeche, S.A. de C.V.’s national scale ratings, refer to the press release “Fitch Toma Acciones de Calificacion Sobre Puertos de Latinoamerica”.

KEY RATING DRIVERS
Autoridad del Canal de Panama (ACP)

The Negative Outlook on ACP continues to reflect its rating constraint at three notches above Panama’s sovereign rating (‘BBB’/Negative Outlook) due to the linkages between ACP and the Panamanian government. Therefore, a downgrade of the IDR of Panama would result in a downgrade of the ratings of ACP.

The affirmation of ACP’s ‘A’ IDR and issue ratings as well as its ‘aa’ Standalone Credit Profile (SCP) rating reflect the robust liquidity that it is expected to maintain to make debt service payments over the next two years. They also reflect very strong DSCRs exceeding 3x and cash balances that are expected to continue fully offsetting outstanding debt balances, even considering potential coronavirus-inflicted reductions on the Canal’s throughput.

In light of the coronavirus pandemic, which has given rise to transportation restrictions and is expected to interrupt trade and cause severe cargo declines in ports, Fitch revised ACP’s rating case to assess a potential volume decline provoked by the coronavirus outbreak. Such a scenario considered a revenue decline of 10% in fiscal 2020 (ending Sept 30.), reflecting the impact that lower cargo levels could have on revenues, with a recovery in 2021 to levels close to those of 2019. Under the revised rating case, minimum DSCR is 3.7x in 2020 and returns to levels above 4x thereafter, which are slightly lower than in the last review, but still strong for the rating category according to applicable criteria. Fitch also ran an additional sensitivity scenario, considering a prolonged and steeper revenue decline into fiscal year 2021 with delayed recovery thereafter. This scenario yields a minimum DSCR of 2.3x in FY 2021, which returns to 4x thereafter. These metrics remain strong and demonstrate ACP’s financial resilience to extreme cargo and revenue declines.

For additional information on ACP, please refer to https://www.fitchratings.com/research/infrastructure-project-finance/fitch-revises-outlook-to-negative-for-panamanian-infrastructure-issuers-after-sovereign-action-11-02-2020

Terminales Portuarios Euroandinos Paita (Paita)

The Rating Watch Negative reflects tighter projected metrics as a consequence of the reduction in volume that Fitch anticipates as a result of the coronavirus pandemic and its effects on the economic environment, including the potential impact on the demand and supply dynamics for commodities, raw material and other goods, and thus need for shipment.

In light of the coronavirus pandemic, which has given rise to transportation restrictions, and is expected to interrupt trade and cause severe cargo declines in ports, Fitch revised ACP’s rating case to assess a potential volume decline provoked by the coronavirus outbreak. Such a scenario considered a decline in volume of 15% in 2020, with a recovery in 2021 to levels close to those of 2019. Under this scenario, average DSCR of 1.9x could indicate a higher rating, according to applicable criteria. However, compulsory investments result in DSCR coverages close to or below 1.0x in two consecutive periods (2023-2024), effectively limiting the rating. Fitch also ran an additional sensitivity scenario, considering a delayed recovery by a quarter. This scenario results in an average DSCR of 1.8x.

The Rating Watch Negative will be resolved once Fitch has more information to form a view on the likely impact the coronavirus pandemic will have on volumes, the shape of the recovery, and on the issuer’s ability to manage expenses and other obligations in order to preserve liquidity

For additional information on Paita, please refer to https://www.fitchratings.com/research/infrastructure-project-finance/fitch-affirms-terminales-portuarios-euroandinos-notes-at-bb-outlook-stable-30-04-2019

As indicated above, the recent outbreak of coronavirus and related government containment measures worldwide creates an uncertain global environment for port volume in the near term. While all related issuers and ports performance data through most recently available issuer data may not have indicated impairment, material changes in revenue and cost profile are occurring across the ports sector and likely to worsen in the coming weeks and months as economic activity suffers and government restrictions are maintained or expanded. Fitch’s ratings are forward-looking in nature, and Fitch will monitor developments in the sector as a result of the virus outbreak as it relates to severity and duration, and incorporate revised base and rating case qualitative and quantitative inputs based on expectations for future performance and assessment of key risks.

RATING SENSITIVITIES
ACP

Developments that may, individually or collectively, lead to Positive rating action:

–A positive rating action is unlikely in the short term.

Developments that may, individually or collectively, lead to Negative rating action:

–A negative rating action on the sovereign rating of Panama;

–Volume reduction in calendar-year 2020 greater than 35% along with the expectation of a slow and extended recovery.

–An observed and continual deterioration on available liquidity levels to face operating and financial obligations.

Paita

Developments that may, individually or collectively, lead to Positive rating action:

–A positive rating action is unlikely in the short term.

Developments that may, individually or collectively, lead to Negative rating action:

–Volume reduction in 2020 greater than 15% along with the expectation of a slow and extended recovery.

–An observed and continual deterioration on available liquidity levels to face operating and financial obligations.

ESG CONSIDERATIONS

ESG issues are credit neutral or have only a minimal credit impact on the entity(ies), either due to their nature or the way in which they are being managed by the entity(ies). For more information on Fitch’s ESG Relevance Scores, visit www.fitchratings.com/esg.
Source: Fitch Ratings