Global Toll Roads May Not Fully Recover Until 1Q23: Fitch Ratings

Global toll road traffic levels may not fully recover to pre-pandemic levels until 1Q23, although the pace of recovery will vary significantly between countries and regions, Fitch Ratings says in its latest quarterly tracker for the sector.

As China is ahead of the rest of the world by two to three months in terms of the pandemic, Fitch Ratings expects that its traffic profile may initially provide some insight into other countries' recovery profiles.

Fitch's expectations for full traffic recovery ranges from 1Q21 to 1Q23 for the US, European, Australian and Latin American toll road networks included in the tracker, although the timing and shape of the recovery are uncertain. 

Traffic recovery is well underway but has stalled recently in some countries where coronavirus infection rates are rising.

Toll road performance remains vulnerable to significant worsening of the pandemic, particularly if there are strict new lockdowns.

However, future lockdowns may be less stringent, with governments reluctant to impose generalised lockdowns again given the high economic impact.

Click here to enlarge: 

Source: Fitch Ratings 

Fitch developed a Coronavirus Rating Case and a Coronavirus Severe Downside Case to assess the potential impact of the pandemic on rated toll roads.

In both cases Fitch considered issuers' ability and intention to reduce operating costs and tap into balance-sheet flexibility, with capex growth plans deferred and dividends reduced.

Rating actions on European and Asia-Pacific toll roads were mostly limited to Outlook revisions under the Coronavirus Rating Case, reflecting resilience, but it is likely that most of these ratings would be downgraded by one or two notches under the Coronavirus Severe Downside Case, as leverage metrics would typically be above the negative rating sensitivity.

The ratings of most US network toll roads were affirmed with a Stable Outlook, reflecting the ability to withstand a severe but temporary revenue shock in 2020.

However, it is likely there would be many downgrades by one or two notches under the Coronavirus Severe Downside Case.

More than half of rated toll roads in Latin America were downgraded by one or two notches, reflecting their sensitivity to the economic performance of the region they serve.

The report "Coronavirus Global Toll Road Traffic Tracker" is available at www.fitchratings.com or by clicking the link above.