Upon completion, the road is not expected to generate sufficient revenues to cover its construction costs. In lieu of strong toll revenue, the government of Peru (GOP) compensates the concessionaire for construction progress with annual payments in U.S. dollars (Certificados de Reconocimiento de Pago Annual de Obras (CRPAOs)) prorated to the advance of works. This transaction will be a securitization of the CRPAOs. CRPAOs delivered from the GOP to the concessionaire will be sold to the issuer. Once generated, CRPAOs are not subject to any condition or performance obligation relating to the concession agreement. Noteholders are not exposed to construction risk.
Cash flow to maintain timely debt service on the transaction will depend on the GOP's continued payment on CRPAOs. While CRPAOs are backed by the full faith and credit of the GOP, on a stand-alone basis, CRPAOs would not receive the same rating as Fitch rated dollar-denominated sovereign obligations. The expected rating of the notes reflects the strength of the underlying CRPAO payments and the enhanced recovery in the event of default derived from the PG provided by the IDB.
For more information on the transaction and detail on Fitch's credit analysis, see the presale report 'IIRSA Norte Finance Limited', on the Fitch website at www.fitchratings.com.