Research Update:

Autopistas Metropolitanas de Puerto Rico's $435 Million Notes Are Rated Prelim. 'BBB-'
Primary Credit Analyst: Jodi E Hecht, New York (1) 212-438-2019; jodi.hecht@standardandpoors.com Secondary Contact: Jatinder Mall, San Francisco (1) 415-371-5071; jatinder.mall@standardandpoors.com

Table Of Contents
Overview Rating Action Rationale Outlook Related Criteria And Research Ratings List

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Research Update:

Autopistas Metropolitanas de Puerto Rico's $435 Million Notes Are Rated Prelim. 'BBB-'
Overview
The public-private partnership Autopistas Metropolitanas de Puerto Rico LLC (Metropistas) is issuing notes to refinance a portion of the debt used acquire the concession to operate two existing toll roads in Puerto Rico--Puerto Rico Highway 22 (PR-22) and Puerto Rico Highway 5 (PR-5). Under a 40-year comprehensive agreement (CA) with the Puerto Rico Highways and Transportation Authority (PRHTA), Metropistas will rehabilitate, operate, and earn traffic toll revenues on the established 52 mile PR-22 (about 95% of revenues) and the newer four-mile PR-5. We are assigning our preliminary 'BBB-' rating to the notes. The stable outlook reflects our belief the project that traffic and operations will be in line with our base case.

Rating Action
On July 8, 2013, Standard & Poor's Rating Services assigned its preliminary 'BBB-' rating to Autopistas Metropolitanas de Puerto Rico LLC's (Metropistas) $435 million senior secured notes due June 2035. The rating is subject to our review of executable documentation that includes terms that Metropistas has represented and we have included in our rating conclusion. The outlook is stable.

Rationale
The rating reflects our view of the traffic and revenue risk, dependence on revenue growth to cover escalating and uneven annual debt service requirements, and a leveraged financial profile. The sponsors, Abertis Infraestructuras S.A. (owning 45%), GS International Partners II L.P. (32%), and GS Global Infrastructure Partners II L.P. (23%) through Metropistas assumed operations of the PR-22 and PR-5 in September 2011. It continues to implement operational efficiencies and complete the accelerated safety upgrades (ASU) required under the CA. We believe it benefits from the 40 year CA with the Puerto Rico Highways and Transportation Authority (PRHTA), which establishes a favorable toll rate-setting regime and reasonable operating provisions. We believe the project has the following strengths: The mature main road, PR-22, has over 40 years of operating history and serves about one-third of the island's population and the main employment corridor of San Juan, the capital and largest city. The road has an open

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barrier system that allows for free movements with limited viable competing alternatives; Sound history of steady transaction and revenue growth at a compounded average annual growth of 4.3% and 8.2% respectively, on an adjusted basis, from 1990-2012, with revenues declining only three times since 1990; The sponsors have significant practice operating toll roads globally. The project is retaining project operations and has hired qualified managers with global and local experience, and Fairly resilient debt service coverage ratios (DSCR) averaging 1.62x with a minimum of 1.43x under the S&P base case, which assumes lower growth in transactions and toll rates than the project assumes. We believe the project has the following weaknesses: Although traffic and revenue from PR-22 has shown strong resilience, the recession was especially severe in Puerto Rico and it is still recovering, making near term traffic and revenue projections uncertain; The tolling scheme permits Metropistas to raise toll rates annually at a rate that is faster than Puerto Rico's CPI. Toll rates can be raised annually by the change in U.S. CPI plus 1.5%. Because U.S. CPI historically grows faster than Puerto Rico's CPI, there will be real annual toll rate increases; Uncertainty regarding the stabilized level of operating expenses. The project continues to optimize staffing and costs. A key reduction is expected in 2015 when the tolling services agreement expires and its expects to reduce the cost per transaction for electronic toll collection by as much as 50% per transaction under a new arraignment; and An escalating and uneven debt service schedule sculpted to accommodate the projected lumpy major maintenance needs that will require constant revenue growth through traffic or rate increases throughout the debt term. PR-22 is a seasoned, well established 52-mile toll road that runs along the northern coast of Puerto Rico, from San Juan to Hatillo. The users are primarily passenger cars (96%) and it is the busiest highway in Puerto Rico. It has 118 bridges and seven toll plazas operating with an open-barrier system. The traffic is directional with the heaviest congestion occurring eastbound in the morning traveling into San Juan and Bayamon and westbound in the afternoon returning home. The competing alternative is PR-2, a local road with traffic lights that runs parallel and intersects PR-22 in several sections. PR-2 is congested and does not save drivers time, but it provides opportunities for cars to bypass the toll plazas. Despite this ability to bypass the plazas, the market share is fairly consistent, with PR-22 maintaining about 70% and PR-2 30%. PR-5 is a four-mile toll road running south from San Juan to Bayamon, a key business area. It is still in ramp-up, after opening in 2006 and contributes about 5% of total revenues. These two toll roads are part of a six toll road system with PRHTA operating the remainder. Electronic toll collection has grown to 86% in 2012 as Metropistas converted most cash lanes in the toll plazas to electronic toll collection. This reconfiguration also relieved

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congestion at the plazas. The toll road is moving to 100% electronic collections in 2014, eliminating the historic concerns over cash leakage. The traffic and revenue trends are largely tied to local economic cycles, specifically unemployment and changes in GDP. Economic cycles in Puerto Rico move in line with U.S. averages, but are more severe and longer. The compounded average annual growth in transactions since 2007 illustrates this point, averaging 0.8%, reflecting the strong growth through 2009 followed by a decline and slow rebound through 2013. Over the years, the toll plazas went from two-way to one-way and ramp tolls were added and these changes influence long-term growth rates. On the revenue side, the toll road is highly inelastic given the limited number of competing alternatives and lack of public transportation options. Tolls were last increased in 2005 by a significant 43.5% and the 5 cents (about 5%) electronic toll collection discount was removed in January 2013. The average toll rates for PR-22 traveling east of 7.2 cents per mile and for traveling west of 6.3 cent per mile are somewhat below other statewide systems. The rate for PR-5 at 12.5 cent per mile is in line with other newly built U.S. toll roads. However, these averages are calculated using the entire length of the road while the average trip length is shorter at 32 miles. We believe the traffic and revenue forecast by Metropistas is aggressive. Under the S&P base case, we lowered the near-term transaction growth to the historic average of 2% through 2019 and then tapered growth through the balance of the debt term to 1.33%. In addition, we assumed toll rates would increase annually at our forecast long-term CPI rate of 2% plus 1.5%, lower than Metropistas assumption of 2.5% growth. We did not include any additional revenue from the Bus Rapid Transit/Dynamic Toll Lanes project opening in August 2013 because of the speculative nature of the revenues. Bond proceeds will partially refund the bank loan and we assumed the remaining bank loan would be refinanced in 2015 with a 6.5% interest. Finally, we increased the operating expenses by 5% to represent a higher cost per transaction of about 8 cents above the 6 cents assumed in management's case. As a result, the DSCR averaged 1.62x with a minimum of 1.43x. We ran several sensitivities and the project cash flows were most sensitive to lower CPI growth and can withstand zero growth in transactions throughout the debt's term.

Liquidity
Liquidity over the life of the project is "satisfactory" for the investment-grade rating. Liquidity during operations will include a debt service reserve account equal to 12 months debt service payments, initially backed half by a letter of credit and half funded with cash. This account can be reduced to six months when the DSCR exceeds 1.75x. In addition, the project has a major maintenance equipment reserve account that it will initially fund to $66 million for the balance of the ASU improvements and additional road paving and bridge repair projects. The project is required to reserve the following year's expected major maintenance requirements. Given the uneven capital spending profile, which is typical in road projects, this reserving

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mechanism does not smooth these requirements.

Outlook
The stable outlook reflects our view that the project will perform in line with the S&P base case. Although we do not expect a rating revision in the near term, we could raise the rating after the operating expenses stabilize, which our base case assumes will occur in 2016, and if debt service coverage exceeds our expectations of about 1.7x driven by a combination of resumption of stabilized growth in transactions and toll rate increases. Because cash flow volatility is a key credit concern for toll roads, our rating emphasizes not only absolute coverage levels, but also stable coverage. We could lower the rating if debt service coverage is below 1.3x for an extended period after the project stabilizes or if we see significant volatility in coverage.

Related Criteria And Research

Project Finance Construction and Operations Counterparty Methodology, Dec. 20, 2011 Updated Project Finance Summary Debt Rating Criteria, Sept. 18, 2007

Ratings List
New Rating Autopistas Metropolitanas De Puerto Rico LLC $435 mil senior secured notes due June 2035

BBB-(prelim)/Stable

Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com and at www.spcapitaliq.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.

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