YXT operates a medium-scale, geographically diversified network of expressways in China, comprising 12 expressways and bridges with a total mileage of 358 km and an average concession life of around 18 years.
YXT's road network is in good condition and the expected maintenance capex requirement is low.
YXT's debt structure is typical of a corporate borrower, utilising non-amortising debt with few of the protective covenants that would be found in a project finance-type structure.
We project progressive deleveraging to 4.1x over the following three years as a result of robust free cash flow generation from YXT's expanded network.
The closest peer to YXT is Shenzhen Expressway Company Limited (SZE, BBB/Rating Watch Negative).
Compared with Autoroutes Paris-Rhin-Rhone (APRR, A-/Stable), YXT's network resilience has not yet been tested in an economic downturn.
YXT's robust and geographically diverse toll road operations across China are the major supports for its 'BBB-' IDR.
Geographically Diversified Assets: At end-2015, YXT had 13 expressways and bridges across China.
Short-Term Impact from Acquisition: YXT's leverage, measured by FFO-adjusted net leverage increased to 5.9x in 2015 from 3.0x in 2014 due to the acquisition of HSE.
Plan to Cut Priority Debt: Fitch estimates the HSE acquisition has pushed YXT's total priority debt at the project-company level to more than 3x its consolidated EBITDA.
YXT has the necessary financial resources to carry out the plan, and a good track record of reducing priority debt from 2012 to 2014.