Research Update: Rutas de Lima Debt Rating Cut To 'B-' From 'BB-' On Early Termination Of Concession; Placed On CreditWatch Negative

The Metropolitan Municipality of Lima (MML) has formally notified Rutas de Lima S.A.C. (RdL or the project) of its decision to terminate the concession agreement, arguing for reasons of public interest. The concession will be terminated on July 29, 2023; 180 days after the notification, which in turn will trigger a nonautomatic event of default of the notes. In addition, there is a social and political crisis in Peru, with protests in the southern region of the country, including the capital, Lima. In this context, we think that both traffic volumes and the ability to adjust tariffs are at risk, resulting in a weaker debt service coverage ratio (DSCR) of around 1.2x in 2023 and a minimum of 0.9x in

...- The Metropolitan Municipality of Lima (MML) has formally notified Rutas de Lima S.A.C. (RdL or the project) of its decision to terminate the concession agreement, arguing for reasons of public interest. The concession will be terminated on July 29, 2023; 180 days after the notification, which in turn will trigger a nonautomatic event of default of the notes. - In addition, there is a social and political crisis in Peru, with protests in the southern region of the country, including the capital, Lima. In this context, we think that both traffic volumes and the ability to adjust tariffs are at risk, resulting in a weaker debt service coverage ratio (DSCR) of around 1.2x in 2023 and a minimum of 0.9x in 2031, as well as less resiliency under a downside scenario. - As a result, on Feb. 10, 2023, S&P Global Ratings lowered its issue-level rating on Rutas de Lima's debt to 'B-' from '##-' and placed the rating on CreditWatch with negative implications. - The CreditWatch negative reflects a...

Research Update