Fitch Ratings has assigned the rating of 'BB(EXP)' to the fixed-rate senior secured notes of Acu Petroleo Luxembourg S.A.R.L. (Acu Petroleo Luxembourg, the Issuer) for up to
The Rating Outlook is Negative.
RATING RATIONALE
Acu Petroleo Luxembourg's rating reflects the characteristics of the underlying asset, an operational oil transshipment port whose revenue profile is exposed to contract renewal and volume ramp-up risks. The project expects volumes to increase as a result of the development of the Pre-Salt Fields which depends on long term oil prices. The expected rating further reflects the regulatory model that does not impose minimum or maximum pricing restrictions and the expectation that the premium tariff, related to the reliability of the port's services, will at least remain stable during the following years.
The expected issuance will count with a full guarantee from
Under the Rating Case, the project presents strong loan life coverage ratio (LLCR) of 1.8x and the project presents consolidated minimum and average debt service coverage ratios (DSCRs), from 2023 to 2026, of 1.2x and 1.6x, respectively. From 2022 to 2024 the volumes are mostly contracted with strong International Oil Companies (IOCs) and DSCRs of around 1.2x in these years are commensurate with the assigned rating.
The Negative Outlook reflects the corresponding Negative Outlook on
KEY RATING DRIVERS
Concentrated Business Model [Revenue Risk: Volume-Midrange]:
Acu Petroleo is a transshipment port that has been operational since 2016. Acu Petroleo's business plan considers a ramp-up in volumes in the next years, based on the development of the Pre-Salt Fields in the
The port is also exposed to the long-term oil prices since the long-term price expectation should determine the development of new fields. The port does not present a diversified business model with the operation fully focused in the transshipment of crude oil.
Inflation Linked Contract [Revenue Risk: Price-Midrange]:
The regulatory model does not impose minimum or maximum pricing restrictions. The ToP agreements set forth annual tariffs readjustments that follows
Modern and Well-Maintained Infrastructure [Infrastructure Development & Renewal-Stronger]:
Acu Petroleo's facilities are modern and well maintained and are expected to have long useful lives. The capacity is above medium-term volume forecast and planned investments comprise predominantly channel dredging and widening, in case volumes ramp-up according to base case projections. The investments and maintenance capex should be funded with operational cash generation.
Fixed Rate with a Target Cash Sweep Mechanism [Debt Structure-Stronger]:
The expected issuance will be senior, fully amortizing, has a fixed interest rate and count with a guarantee from Acu Petroleo. The structure will contemplate a legal and target amortization schedule set to allow for the debt to be fully amortized in 10 years, through a target amortization cash sweep mechanism. The structure presents a strong covenant package that includes financial triggers for dividends distribution (DSCR > 1.30x), change of control provision and a six-month offshore debt service reserve account (DSRA). The structure will also limit new senior indebtedness, which will require rating confirmation.
Financial Summary
Under the rating case, the minimum and average DSCRs, from 2023 to 2026, are 1.2x and 1.6x, respectively. From 2022 to 2024 the volumes are mostly contracted with strong IOCs and DSCRs of around 1.2x in these years are commensurate with the assigned rating. Moreover, metrics should increase over the years, since under the rating case the company is able to perform the cash sweep payments all of the years.
Prumo Participacoes e Investimentos S/A (Prumopar) (senior secured notes; BB/RON) and
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A negative rating action on
Fitch's expectations on the oil price to be below
Failure of the project to renew most of the take-or-pay contracts that are due in 2023.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
The rating could have the Outlook revised to Stable as a result of a positive rating action on
Fitch's expectations on the oil price to be above
Success in the renewal of most of the take-or-pay contracts that are due in 2023.
Best/Worst Case Rating Scenario
International scale credit ratings of Sovereigns, Public Finance and Infrastructure issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
TRANSACTION SUMMARY
Acu Petroleo Luxembourg S.A.R.L. is a non-operation entity that is fully owned by
The expected notes are in the amount of
Proceeds of the offering will be used primarily to refinance the company's existing debt that was originally put in place to finance the construction of the terminal and to pay a one-time distribution to shareholders.
FINANCIAL ANALYSIS
Fitch's Key Assumptions Within the Agency's Base Case for the Issuer:
Foreign Exchange Rate (BLR/USD): 5.20 in 2021, 5.50 in 2022, 5.25 in 2023, 5.25 in 2024, and depreciation according with the difference between IPCA (Brazilian CPI) and
Volume: IHS Base Case projections minus a 10% haircut;
Operational and maintenance cost performed by
Operational and maintenance cost performed by Ferroport: same as management;
Other Operational and maintenance cost: 5% over management;
Capital expenses: 5% over management.
The same assumptions were used in the rating case scenario, with the exception of:
Volume: IHS
Operational and maintenance cost performed by
Operational and maintenance cost performed by Ferroport: same as management;
Other Operational and maintenance cost: 10% over management;
Capital expenses: 10% over management.
Fitch has not differentiated tariffs between the cases as there is a limited operational history and lack of information to form a view about the level of tariffs when demand is higher.
In Fitch's base case, minimum and average (2023-2026) DSCRs and LLCR are 1.7x, 2.6x and 2x respectively. Under the rating the minimum and average (2023-2026) DSCRs and LLCR are 1.2x, 1.6x and 1.8x, respectively.
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