Fitch Affirms Abertis's IDR; Stable Outlook

Fitch Ratings has affirmed Abertis Infraestructuras, S.A.'s (Abertis) Long-Term Issuer Default Rating (IDR) at 'BBB' and its unsecured notes and Abertis Infraestructuras Finance B.V.'s (Abertis Finance) hybrid instruments at 'BB+'.

The Outlook is Stable.

The affirmation follows the recently announced acquisitions and shareholder capital injection of EUR1.3 billion. A full list of rating actions is at the end of this Rating Action Commentary.

RATING RATIONALE

The rating affirmation reflects the improved quality and extended duration of the Abertis portfolio of assets, in a context of a leverage profile that is still commensurate with its current rating. The group's M&A strategy limits the visibility of future capital structure, although, in our view, the potential downsizing of distributions provides financial flexibility.

KEY RATING DRIVERS

On 17 October 2023, Abertis announced the successful bid for four motorways in Puerto Rico. Abertis will operate the assets for 40 years with a modest expansion capex. Puerto Rico Transportation Authority awarded the assets to Abertis for a total cash out of about USD2.85 billion.

The four assets are 192km long; they are operating and are strategic to Puerto Rico, as they are used by local commuters and connecting San Juan metropolitan areas as well as the south and east of the island. Abertis will increase its presence in the region, adding the PR-52, PR-66, PR-20 and PR-53 motorways, to Metropistas (PR-22 and PR-5) and the Teodoro Moscoso Bridge, operated over the past 12 and 20 years, respectively. Financial closing is expected by end-2023.

In addition, Abertis announced the signing of the acquisition of a 56.78% stake in SH288 ('BBB'/Stable), a 17km-long managed lane in Texas from ACS group, for an equity consideration of USD1.5 billion. The asset benefits from a dynamic tooling mechanism and has a 45-year concession granted by the Texas Department of Transportation. SH288 is strategically located in the fast-growing, traffic congested, residential area of Brazoria County and south Harris County, close to Houston employment centers, Texas. Being a brand-new asset, SH288 shows negligible capex requirements. The group will also consolidate about USD0.6 billion of SH288's existing debt. Financial close is expected by year end, after the completion of the customary regulatory approvals.

The new assets will increase the group's portfolio quality and weighted average duration by about two years, enhancing Abertis's debt capacity, in addition to shareholder support. In this context, we view Abertis's average leverage of 6.0x under the Fitch rating case (FRC) as still commensurate with the 'BBB' rating.

Both transactions are consistent with Abertis's strategy aiming at extending its portfolio concession maturity, increasing its presence in mature countries and replacing the EBITDA of the expiring assets. The equity contribution is also consistent with the new corporate governance, which aims to support the company with the necessary resources to expand its portfolio perimeter, while maintaining an investment-grade rating.

For an overview of Abertis's credit profile, including key rating drivers, see 'Fitch Revises Outlook on Abertis to Stable; Affirms Ratings' published 11 April 2023 at www.fitchratings.com.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

Failure to reduce Fitch-adjusted Leverage below 6.2x by 2024 under the FRC.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

A positive rating action is currently unlikely given the projected leverage, level and group acquisitive stance.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.