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

The Outlook is Stable.

KEY RATING DRIVERS

Revenue Risk - Volume - Stronger

Mature, Diversified, Resilient Portfolio

Abertis has a large, diversified network of toll roads spanning nearly 8,000km of networks, mainly located in France, Chile, Spain and Mexico. The European toll road businesses are mature and represent around 55% of consolidated group 2023 EBITDA (2019: around 75%). We expect contribution from European toll roads to further reduce to around 50% in 2027 due to the expiry of two key concession in Italy (A4) and Spain (Avasa).

Most assets are either national core networks with little competition, or assets strategically located in core areas. Traffic is predominantly made up of more stable light vehicles. The overall portfolio's 2007-2019 peak-to-trough traffic change of 6% is low compared to the peer average.

Revenue Risk - Price - Midrange

Inflation-Linked Tariffs

The concession frameworks under which Abertis operates are robust and generally track inflation or a large portion of it. In some jurisdictions the tariff systems also allow the recovery of implemented capex, partly detaching the group's cash flow generation from weak traffic performance. Generally, tariffs have increased steadily in the past.

Infrastructure Dev. & Renewal - Stronger

Flexible Plan, Experienced Operator

Abertis has extensive experience and expertise in delivering capex on its network. Some concessions also allow for the recovery of capex through the adjustment of toll rates.

Debt Structure - 1 - Midrange

Unsecured Bullet Debt

Abertis's debt is largely non-amortising and lacks material structural protections, which are typical of fully covenanted debt structures. Refinancing risk is mitigated by a well-diversified range of bullet maturities, demonstrated solid access to bond markets, and proactive debt management aimed at capitalising on favourable conditions to strengthen the capital structure.

Hybrid Bonds - Deep Subordination, 50% Equity Credit

The hybrid notes are unconditionally and irrevocably guaranteed by Abertis. The notes are deeply subordinated and rank senior only to Abertis Finance's share capital, while coupon payments can be deferred at the option of the issuer. These features are reflected in the notes' rating, which is two notches lower than Abertis's senior unsecured rating. We apply a 50% equity credit (EC) to the notes to reflects the hybrid's cumulative interest coupon, a feature that is more debt-like in nature.

For further information on Abertis's rating, see 'Fitch Rates Abertis's Hybrid Bonds 'BB+', published 27 January 2021 at www.fitchratings.com.

Weak Mundys and Abertis Linkage

Fitch assesses the legal ring-fencing and access & control between Abertis and its weaker parent, Mundys S.p.A (consolidated credit profile: BB+/Stable), as 'open' and 'insulated', respectively, under its Parent and Subsidiary Linkage (PSL) Criteria. In particular, we believe the governance structure at Abertis adequately insulates it from Mundys at the current rating, ie. two notches above the 'BB+' rating of consolidated Mundys.

We believe Mundys' ability to extract cash from its stronger subsidiary is impaired by the presence of the co-shareholder (ACS) whose consent is required for relevant reserve matters including a change in the dividend policy, which also has to remain compliant with a minimum investment-grade rating of Abertis.

Financial Profile

Under the Fitch rating case (FRC) Abertis will progressively deleverage towards around 5.0x by end-2028, from 7.0x at end-2023. The trend shows some volatility during 2027, due to the expiration of few concessions leading to EUR400 million EBITDA loss in that year, which will partially be compensated by the organic growth of the portfolio.

PEER GROUP

Abertis shares a number of common features with APRR (A/Stable). Both issuers are pure brownfield toll road operators with a corporate-like bullet debt structure and a 'Stronger' assessment of volume risk. Abertis is bigger and has a more geographically diversified portfolio of assets but APRR shows higher resilience during economic downturns (peak-to-trough of around 3% compared with 6% for Abertis's portfolio). A lower projected leverage of below 4x over a longer concession tenor supports APRR's higher rating.

RATING SENSITIVITIES

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

Fitch-adjusted leverage above 6.2x by 2025 under the FRC

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

Positive rating action is currently unlikely given the group's acquisitive strategy

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.

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