News Column

Moody's assigns Aa3 to Central Nippon Expressway's USD bonds

July 28, 2014



Moody's Japan K.K. has assigned a Aa3 rating to a bond issued by Central Nippon Expressway Company Limited (C-NEXCO). The rating outlook is stable.

The specific bond issuance is:

 USD 500 million, due 2019

RATINGS RATIONALE

The rating Aa3 reflects C-NEXCO's strong links with the government of Japan(Aa3, stable).

We believe that the creditworthiness of C-NEXCO reflects that of the sovereign, given its importance to the development of Japan's transportation infrastructure, as well as the high level of credit support from, and the heavy involvement of, the government in its operations.

C-NEXCO is fully owned by the government. Its operations are governed by legal statutes as well as agreements with Japan Expressway Holding and Debt Repayment Agency (JEHDRA, Aa3). The Ministry of Land, Infrastructure and Transport (MLIT) is heavily involved in the development of the company's business plans, as well as the construction of expressways, collection of tolls, issuance of long-term debt, and offerings of new stock. The company must receive approval from the MLIT whenever it issues debt.

The expressway properties are owned by JEHDRA and leased to C-NEXCO.

Lease payments, tolls, and restrictions on construction costs are stipulated in the agreements between the two parties in accordance with the relevant laws.

Such a framework provides C-NEXCO with a highly stable operating environment. It allows for the periodic adjustment of rents and tolls to ensure that C-NEXCO's financial profile remains sound. With a predictable level of cash flow, the company can manage its liquidity more easily throughout the year.

Central Nippon Expressway Company Limited was established on October 1,

2005 under the highway company law. Its headquarters is in Nagoya.


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Source: EMBIN (Emerging Markets Business Information News)


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