S&P: Aeropuerto Internacional de Tocumen 'BBB' Debt Ratings Affirmed, Stand-Alone Credit Profile Raised To 'bbb' From 'bbb-'

S&P Global Ratings affirmed its 'BBB' issue-level ratings on Aeropuerto International de Tocumen S. A.'s (Tocumen's) senior secured bonds due 2023 and 2036. The outlook on both bonds remains stable.

Tocumen is implementing one of the most significant capital expenditure programs since its inception: the construction of a second terminal that will increase the airport's capacity to more than 20 million passengers per year. Odebrecht Engenharia e Construcao S. A. (CCC/Negative/--) started construction in mid-2013 under an engineering, procurement, and construction contract. Based on the project's most recent information, the new terminal is expected to start operations in the last quarter of 2018.

To finance part of the construction, Tocumen issued a $650 million senior bond in October 2013 and an additional one of $575 million in the first half of 2016. Both bonds are pari passu and share the claims on the pledged assets.

We affirmed our issue-level ratings at 'BBB'. Previously, our view of the very high likelihood of support from the Panamanian government was providing an additional notch the project's SACP. Now, with a higher SACP, the effect is neutral.

We raised the project's SACP to 'bbb' from 'bbb-' because of a lesser operational risk because the minimum projected DSCR will improve to 1.34x from 1.17x in 2017, according to our updated base-case scenario. This resulted from a combination of higher commercial revenue due to the renegotiation of existing contracts at higher prices for the north terminal late last year, the addition of new spaces expected for 2018 due to the likely completion of the south terminal, and the increasing passenger growth rate. We believe Tocumen will continue to have strong potential for traffic growth because: we expect the Panama and Latin American economies to grow in 2018, Panama is attracting increasing interest as a tourist and logistics destination, and we believe that it will continue to be a strategic hub for Copa Airlines that will continue to expand its services. Moreover, we expect international carriers to add new routes to Panama given its favorable geographic location.

Previous SACP reflected the operational phase. Now, both phases, (construction and operational) reflect our view of the same risks, resulting in higher SACP. The rating affirmation incorporates our expectation of the finalization of construction in late 2018 and within budget and our view of the still very high likelihood of support from the Panamanian government (foreign and local currencies: BBB/Stable/A-2), which is the airport's 100% owner, in an event of distress, which is now neutral for the ratings.

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