Research Update: 407 International Inc.'s $500 Million Senior Secured Notes Rated 'A'; Other Ratings Affirmed; Outlook Stable

407 International Inc. is issuing C$500 million in senior secured notes due in 2054. It will use the proceeds to repay C$240 million outstanding under its revolver credit facility, fund reserves, and for general corporate purposes, including distributions. We assigned our 'A' rating to the new senior secured notes. We also affirmed the ratings on the company's senior ('A'), junior ('A-'), and subordinate ('BBB') debt. The outlook is stable. The rating action reflects the resiliency and inelasticity of 407's traffic, which continues to increase despite a subdued economy and weighted average 15% toll increase (based on our calculation) this year. Toll revenues are now 113% of 2019 levels and growth in the debt service coverage ratio (DSCR) supports additional leverage.

...- 407 International Inc. is issuing C$500 million in senior secured notes due in 2054. It will use the proceeds to repay C$240 million outstanding under its revolver credit facility, fund reserves, and for general corporate purposes, including distributions. - We assigned our 'A' rating to the new senior secured notes. We also affirmed the ratings on the company's senior ('A'), junior ('A-'), and subordinate ('###') debt. The outlook is stable. - The rating action reflects the resiliency and inelasticity of 407's traffic, which continues to increase despite a subdued economy and weighted average 15% toll increase (based on our calculation) this year. Toll revenues are now 113% of 2019 levels and growth in the debt service coverage ratio (DSCR) supports additional leverage. Additionally, preliminary results show that management's pilot Schedule 22 (congestion) payment mitigation strategies since the beginning of the second quarter have been effective, in line with its expectation....

Research Update