CHICAGO--(BUSINESS WIRE)--Fitch Ratings affirms the senior secured variable funding notes (VFNs) issued by Red Dorsal Finance Limited (RDFL) as follows:
--Series 2015-1 senior secured VFNs due on 2031 at 'BBB'; Outlook Stable.
The transaction is a USD denominated securitization of investment recognition payments ([RPIs] - Retribucion Por Inversiones), executed by the Government of Peru (GOP) through its Ministry of Transportation and Communication (MTC). The RPIs are related to the construction and design, of the fiber optic network in Peru, Red Dorsal Nacional de Fibra Optica (RDNFO). The proceeds of the issuance will be used to purchase the RPIs from the Concessionaire (Azteca Comunicaciones Peru S.A.C. - ACP) and pay transaction expenses.
Fitch's ratings address the likelihood of timely payment of interest and principal.
KEY RATING DRIVERS
Reliance on the Sovereign Contingent Guarantee:
The RDNFO is a Greenfield project which has yet to start operations. No historical information is available to validate the potential flows expected to be received from the tariff collections. As a result, Fitch assumes that payment on the notes will completely rely on the government contingent support to make timely payment of the RPIs.
Strength of Government Obligations:
The guarantee backing the RPI payments is considered an irrevocable and unconditional obligation of the GOP denominated in dollars. This obligation is included in the GOP's multiyear budgetary projections with established history and legislative acceptance. Unlike CRPAOs, this is a contingent obligation which is governed by Peruvian law, and does not cross-default with other RPIs.
To determine the strength of the government obligation and its differentiation from the foreign currency (FC) Issuer Default Rating (IDR), Fitch incorporates perspectives from its sovereign group and determined that the credit quality of the obligation is commensurate with the ratings of the transactions.
No Exposure to Construction/Performance Risk:
The RPI payments backing this transaction will originate once an Acta de Adjudicacion de los Bienes de la Concesion (AABC) has been executed. An AABC is issued upon construction completion of a partial delivery of the project, and it is independent of future completion in full of any other partial delivery in the project. Thus, the transaction is not exposed to construction risk. Payments on the RPIs are not conditioned by future performance of the project. Furthermore, payment on the RPIs is not exposed to performance risks related to the operation and usage of the RDNFO post construction completion.
Rating Linked to Sovereign FC IDR:
GOP's guarantee is denominated in dollars, thus the rating reflects the likelihood of the sovereign paying such obligation in foreign currency, On March 23, 2016, Fitch affirmed Peru's long-term foreign currency (FC) IDR at 'BBB+'; Stable Outlook. The country ceiling was affirmed at 'A-'. For further information on the credit quality of the sovereign, please see Fitch's full rating report on Peru published on April 4, 2016, available at www.fitchratings.com.
Adequate Liquidity:
The transaction benefits from a Reserve Account (RA) funded at closing, equal to six months of debt service payments on the notes. The balance of the RA will decrease to three months of notes payments if the Project Trust Coverage Ratio is at least 1.5 times (x). The Project Trust Coverage Ratio is calculated as the ratio of the revenues received in the 'Cuenta Ingresos Disponibles' during the previous four quarters divided by the RPI and RPMO obligations for the next four quarters.
RATING SENSITIVITIES
The rating assigned to the notes will be sensitive to changes in Peru's FC IDR. Additionally, any change in Fitch's view regarding the strength of the sovereign contingent guarantee may affect the rating assigned to this transaction.
DUE DILIGENCE USAGE
No third-party due diligence was provided to or reviewed by Fitch in relation to this rating action.
Additional information is available at www.fitchratings.com.
Sources of Information:
In addition to the sources of information identified in the master criteria, this action was additionally informed by Azteca Comunicaciones Peru S.A.C.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14
May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1002041
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1002041
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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