Reuters: Mergers News: TEXT-Fitch: Obrascon Huarte Lain toll roads deal aids deleveraging

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TEXT-Fitch: Obrascon Huarte Lain toll roads deal aids deleveraging Apr 25th 2012, 16:59 Tweet Share this Email Print Related Topics Stocks » M&A » Bonds News » Bonds » Markets » Industrials » Wed Apr 25, 2012 12:59pm EDT April 25 - Obrascon Huarte Lain's sale of its Brazilian and Chilean toll roads to Abertis Infraestructuras increases the group's ability to hit its deleveraging target and should provide a more reliable dividend stream, Fitch Ratings says. OHL's FY11 leverage, measured as recourse adjusted net debt/EBITDAR, stabilised at 3.0x with management targeting further deleveraging to 2.0x by FY12. Provided that OHL uses a significant portion of the EUR200m cash it receives in the Abertis deal for debt reduction, the sale is likely to be positive for the group's credit quality and increase its chances of hitting this target. A decrease in leverage is a factor that we have previously said could contribute to a rating upgrade for Spain's OHL, currently 'BB-'/Stable. However, this would need to be accompanied by a continued improvement in international new orders, more than offsetting its dismal Spanish construction activity. As well as the cash element of the deal, OHL will also receive a 10% stake in Abertis, worth about EUR900m. The company is therefore effectively replacing ring-fenced Latam concession assets with an equity stake in a global infrastructure operator with a proven track record for paying dividends. We believe that, based on Abertis' historical dividend payout, OHL could receive about EUR50m in yearly dividends from its stake. In contrast, creditors at the OHL parent level have not benefitted from the cash flow generated by the toll road operations, as minimal dividends have been distributed from them. The strategic tie-up between these two entities is logical with OHL (a contractor and developer of infrastructure assets) now linked to Abertis (a mature infrastructure operator). This may provide OHL with a strategic partner to continue its strategy of rotating mature concession assets and focus on its competitive advantage: building and development of infrastructure assets. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. Related Quotes and News Company Price Related News Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

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