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

DBRS has today assigned a rating of “A” to the $250 million Series 14-A1 senior notes issue (the Notes) of 407 International Inc. (407 or the Company). The Notes have been issued from 407’s August 3, 2012, shelf prospectus.

The intended use of proceeds from the Notes will be (i) to repay existing indebtedness under the Company’s bank facility; (ii) 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 (iii) for general corporate purposes. The financing is consistent with DBRS’s expectations incorporated in the August 9, 2013, confirmation of 407’s ratings.

The Notes have a maturity date of May 16, 2024, 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.

For the quarter ended March 31, 2014, total trips were up by 2.7% while the average number of workday trips increased 2.3% over the same period in 2013, although this was partially attributable to the timing of the 2014 Easter holiday, which resulted in an additional workday during the quarter. As compared to Q1 2013, higher tolls and increased patronage contributed to an 11.2% revenue increase while operating expenses were up 12.2%, principally as a result of higher winter maintenance expenses, higher provisions for doubtful accounts (resulting from higher revenues), higher collection costs and provisioning for customer litigation. Correspondingly, quarterly EBITDA increased by 10.9% compared to Q1 2013.

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.

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