S&P revises ratings outlook for Autopistas Metropolitanas de Puerto Rico
Despite robust traffic and revenue growth, the stable outlook revision primarily stems from uncertainty around the project’s capital structure.
S&P Global Ratings has revised its outlook for Autopistas Metropolitanas de Puerto Rico LLC, the operator of the PR-22 and PR-5 toll highways, from positive to stable, while affirming its ‘BBB’ rating on the company’s senior secured notes.
This adjustment comes despite strong post-pandemic traffic growth and positive revenue projections for 2024, which are significantly above pre-pandemic levels.
Autopistas Metropolitanas, which manages toll highways in Puerto Rico’s northeast and northwest regions, reported that 2023 traffic exceeded pre-pandemic levels by 4.6%.
The company projects continued growth into 2024, with anticipated annual traffic increases of about 2%, outpacing previous expectations by nearly 5%. Toll rates have risen, with an anticipated blended toll increase of around 6% in 2024, following an 8.5% increase in 2023. Revenue for 2024 is expected to surpass $202 million, representing a 36% increase from 2019 levels.
S&P cited multiple factors in its rating decision, underscoring the toll network’s importance as a vital corridor for commuters, commercial transport and economic activities across Puerto Rico. Given its strategic role in sectors like manufacturing and pharmaceuticals, the toll network serves a substantial part of the island’s population. Additionally, remote work has had limited effect on toll revenue, as a significant portion of the workforce holds in-person jobs.
However, S&P’s decision to change the outlook to stable rather than positive reflects concerns over possible changes in the project’s capital structure. Autopistas Metropolitanas’ strong revenue and low leverage could lead management to seek additional debt financing, creating uncertainty about the long-term stability of the current credit rating.
The toll highways have shown resilience against environmental and operational challenges, including the temporary closure of Dynamic Toll Lanes (DTLs) in 2024 for maintenance, as well as disruptions from heavy rain and Tropical Storm Ernesto, S&P noted.
Autopistas Metropolitanas’ financial outlook remains favorable, with S&P estimating a minimum debt service coverage ratio (DSCR) of 1.92x in 2027, up from a previous estimate of 1.73x. This improvement reflects revenue growth that has strengthened the project’s financial position. However, S&P warned that a DSCR below 1.45x to 1.60x could result in a downgrade if traffic or revenue unexpectedly declines.
S&P also highlighted potential risks related to Puerto Rico’s economic and demographic changes, particularly concerns about outmigration and its impact on toll revenue and population stability. Additionally, the highways’ location in a hurricane-prone area poses environmental risks.
“Indirect governance and direct environmental factors have fundamentally affected … credit quality and will be important factors for our rating in the future,” S&P stated.
While Autopistas Metropolitanas weathered Hurricane María in 2017 without major disruptions, the threat of future extreme weather events remains a critical factor in S&P’s ongoing assessment, the rating agency noted.
