DBRS Assigns “A” Rating to 407 International Inc.’s New Issue, Stable Trend

DBRS Limited (DBRS) has today assigned a rating of “A” to the $500 million Series 16-A1 Senior Notes issue (the Notes) of 407 International Inc. (407 or the Company). The trend is Stable. 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) repay principal amounts owing under the Company’s credit facilities, (2) fund the Series Reserve Account in respect of the Notes and (3) for general corporate purposes. The financing is consistent with DBRS’s expectations incorporated in the December 2015 confirmation of the Company’s rating.

The Notes have a maturity date of May 21, 2047, and rank pari passu with all other senior obligations of the Company. Correspondingly, the “A” rating and Stable trend are consistent with the ratings and trend currently assigned to 407’s senior debt.

For the quarter ended March 31, 2016, total trips were up by 0.7%, while vehicle kilometres travelled increased by 0.8%; however, the average number of workday trips decreased 0.3% for the comparable period. For the same period, as compared to Q1 2015, higher tolls and increased patronage contributed to a 5.3% revenue increase while operating expenses decreased by 9.2%, principally as a result of lower contract expenses related to the 407 Phase 1 expansion project and lower consulting costs, but this was partly offset by higher winter maintenance contract costs, higher systems operations expenses, higher provisions for doubtful accounts and increased billing costs. Correspondingly, quarterly EBITDA increased by 8.8% compared to Q1 2015.

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

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