Brisa downgraded on back of sovereign crisis

S&P has cut the Portuguese toll road operator’s credit rating to BBB- on the back of revised economic prospects for Portugal. Brisa has reacted to the downgrade, accusing the ratings agency of not giving it enough time to adapt to changed liquidity criteria and saying the cut doesn’t reflect its credit strength.

Standard & Poor’s (S&P), the ratings agency, has downgraded Portuguese toll road operator Brisa’s long-term credit rating to BBB- from a previous rating of BBB.

The ratings agency justified the downgrade by pointing to poor traffic performance across Brisa’s road network, mainly located in Portugal, revised economic prospects for Portugal’s growth and insufficient liquidity on Brisa’s part. The downgrade follows the recent cut of Portugal’s sovereign credit rating from A+ to A-.

However, Brisa has hit back at the ratings cut arguing that it “does not reflect the credit strength of Brisa”. It is alleging that the ratings agency toughened liquidity criteria without giving the company enough time to adapt. It is also arguing that “S&P is not considering the proven ability and commitment of the company to maintain or even improve those credit metrics”.

An immediate impact of the downgrade will be to force Brisa to renegotiate the facilities it has taken with the European Investment Bank, given that the bank requires third-party bank guarantees to provide loans to firms with a credit rating below BBB. But Brisa said it plans to renegotiate a waiver of this requirement until it finishes its ongoing corporate restructuring.

Under its new corporate structure, Brisa’s main concession, a road network across Portugal, will be placed in a separate vehicle. Following that, “solid investment grade credit ratings will be sought for Brisa Concession on a stand-alone basis through the ring fencing from the rest of the group,” Brisa said in a statement. Its main concession has low capex requirements, low cost of debt, positive cash flows and “very comfortable liquidity headroom,” Brisa added.

Brisa is also rated Baa1 by Moody's.