Research Update: 407 International Inc.'s C$700 Million Senior Debt Issue Rated 'A'; Other Existing Ratings Affirmed

407 International Inc. is issuing 2.84% C$700 million in senior secured notes due 2050. It will use the proceeds to repay C$135 million outstanding on the project's bank credit facility (unrated), fund the related reserve, and general corporate purposes (likely distributions to sponsors). We are assigning our 'A' rating to the debt. We are also affirming our 'A' rating on 407's existing senior debt, our 'A-' rating on the company's junior debt, and our 'BBB' rating on its subordinated debt. The outlook is stable. The project has issued about C$500 million in additional debt annually while maintaining its credit quality. As such, this issuance is above past issuances. This is because of the low interest rate environment and the project's

...- 407 International Inc. is issuing 2.84% C$700 million in senior secured notes due 2050. It will use the proceeds to repay C$135 million outstanding on the project's bank credit facility (unrated), fund the related reserve, and general corporate purposes (likely distributions to sponsors). - We are assigning our 'A' rating to the debt. We are also affirming our 'A' rating on 407's existing senior debt, our 'A-' rating on the company's junior debt, and our '###' rating on its subordinated debt. The outlook is stable. - The project has issued about C$500 million in additional debt annually while maintaining its credit quality. As such, this issuance is above past issuances. This is because of the low interest rate environment and the project's rising EBITDA. The significant growth in toll rates has increased cash flows due largely to the inelastic demand of drivers who have borne these increases without significantly reducing usage. This has resulted in improving debt service coverage ratios...

Research Update