DBRS Rates 407 International Inc. Debt Issue “A” Stable

DBRS Limited (DBRS) has today assigned a rating of “A” with a Stable trend to the $150 million Series 15-A1 senior notes issue (the Notes) of 407 International Inc. (407 or the Company). The Notes have been issued from 407’s March 18, 2015, Shelf Prospectus.

The intended use of proceeds from the Notes will be to (1) to repay existing indebtedness under the Company’s bank facility; (2) to fund the Series Reserve Account in the Debt Service Reserve Fund (as both terms are defined in the Indenture) in respect of the Notes; and (3) for general corporate purposes. The financing is consistent with DBRS’s expectations incorporated in the August 25, 2014, confirmation of 407’s ratings.

The Series 15-A1 Notes have a maturity date of March 27, 2045, and rank pari passu with all other senior obligations of the Company. As a result, the rating is consistent with the ratings previously assigned by DBRS to the Company’s similarly ranked bonds outstanding.

During 2014, vehicle kilometres traveled grew faster than the Company’s expectations at 3.4%, while average workday trips were up 2.7% compared with 2013. Combined with the toll increases implemented in February 2014, this resulted in revenue growth of 10.8%. Expenses increased to a slightly larger degree at 11.4%, roughly in line with the Company’s expectations. Notwithstanding, EBITDA still increased by a healthy 10.7% for the year, translating to senior and junior interest coverage of 2.4 times (x) and a senior debt service coverage ratio with implied amortization of 2.0x. The Company was not required to make any congestion payments in 2014.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodology is Rating Public-Private Partnerships, which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

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