Atlantia could be pressured to divest assets post Abertis takeover

Financial ‘flexibility’ of the combined entity would be constrained, assuming the €16bn transaction is greenlit by regulators, Standard & Poor’s said.

Atlantia’s leverage is set to increase significantly as it raises debt to fund its €16.3 billion acquisition of Spain’s Abertis, which is pending approval by regulators.

In a report released this week, Standard & Poor’s states that the deal, which if allowed to proceed would create the world’s largest transport infrastructure group, would push Atlantia’s funds-from operation-to-debt ratio to 11.5-14.5 percent, from its current 13-16 percent average.

“We could lower the ratings on Atlantia by one notch if its core credit metrics were to deteriorate below 12 percent on a continuous basis following the Abertis takeover,” S&P said. “This could occur if, for example, a low proportion of payment in shares – combined with a very high level of acceptance – is not mitigated by additional divestments or by revision of its financial policy.”

The wide range in estimates depends on a variety of factors, including levels of acceptance by shareholders, partial share payments and proceeds from the sales of minority stakes in certain core assets or the divestment of non-core ones.

“Our scenarios include the proceeds from the completed sale of 10 percent in Autostrade per L'Italia, a 10 percent sale of Aéroports de la Côte d'Azur to Monaco and its 21 percent stake in SAVE, the concessionaire of Treviso and Venice airports, but don't take into consideration Atlantia's significant additional asset flexibility,” the agency noted.

S&P did emphasise some important positives of the merger, such as the diversification of Atlantia’s business away from Italy, making the group less vulnerable to a downturn in its core market. It saw complementarity in the portfolio of concessions and supportive regulatory frameworks where these are based.

But it did underline higher exposure to Latin America’s “soft” currencies and raised questions about the financial flexibility of the combined entity. It also pointed out that the transaction is not certain to close, even if 50 percent of Abertis’ shareholders end up approving the move.

“The transaction will require approvals from competition and transport authorities in the markets they operate,” S&P said, listing Italian regulators, the European Commission, certain Brazilian authorities as well as their peers in the US, Argentina and Chile.