Rating Action: Moody’s assigns Ba2/Aa2.br ratings to Intervias’ BRL500 million new debenture issuance; stable outlookGlobal Credit Research – 06 Apr 2021Sao Paulo, April 06, 2021 — Moody’s América Latina Ltda. (“Moody’s”) assigned Ba2 global scale rating and Aa2.br national scale rating to Concessionaria de Rodovias Interior Paulista (Intervias)’s planned issuance of BRL500 million senior unsecured debentures (8th issuance), with final maturity in 2026. Intervias’ Ba2/Aa2.br corporate family ratings (CFR) are unaffected by this rating action. The ratings outlook is stable.The ratings assigned to the proposed debentures are based on preliminary documentation. Moody’s does not anticipate changes in the main conditions that the debentures will carry. Should issuance conditions and/or final documentation deviate from the original ones submitted and reviewed by the rating agency, Moody’s will assess the impact that these differences may have on the ratings and act accordingly.RATINGS RATIONALEThe Ba2/Aa2.br ratings assigned to Intervias’ new debt issuance reflect the company’s robust asset features, limited competition from alternative routes, and the location on a well-developed and economically diversified region in the State of Sao Paulo (Ba2 stable). Intervias’ credit profile also reflects the high concentration of heavy vehicles in the traffic profile and the relatively low capital spending needs until the end of the concession in 2028. The global scale rating is constrained by the sovereign rating (Government of Brazil, Ba2 stable) given the company’s regional operational profile with regulated revenues that are highly correlated to the country’s GDP. The credit profile also reflects the company’s overall credit links with its parent, Arteris S.A., given the high balance of intracompany loan receivables and high dividend distributions that are used to manage liquidity across the group.Intervias has showed some resilience in traffic in 2020 despite the coronavirus outbreak and economic contraction. Company’s traffic decreased 3.7% in the year compared to a 13% decrease in the sector average. As a result, Intervias’ credit metrics remained well positioned for its rating category in 2020, with funds from operations (FFO) to debt metric of 21% in and cash interest coverage of 5.3x. Metrics will slightly deteriorate in 2021 upon the closing of the proposed issuance of debentures, recovering in 2022. We expect FFO/debt of 17% in 2021 and 21% in 2022 and cash interest coverage of 4.7x in 2021 and 4.3x in 2022.The stable outlook takes into consideration the traffic deterioration observed in 2020, as a result of the coronavirus outbreak and economic contraction, along with Moody’s assumption that demand will gradually recover in the next 12-18 months, supported by the improvement on vaccination efforts and the prospective ease in social distancing measures and business closures. Other factors related to the economic downturn that could also pressure traffic performance include rising unemployment and the failure of government measures to boost consumer confidence, or the prolongation of the second wave of contagion leading to extended social distancing measures. Nonetheless, we consider Intervias has flexibility to manage liquidity through lower cash distributions to the shareholders in the event of a prolonged downturn. The stable outlook relates to Moody’s expectation that Intervias’ internal cash generation and liquidity position will remain adequate to support maintenance expenditure requirements and debt service through 2022.The proposed debentures will have financial covenants consisting of Net Debt to EBITDA (excluding fixed concession payments) lower than 3.5x and debt service coverage ratio higher than 1.2x. Proceeds of this issuance will be used to refinance the second promissory notes due in April 2021 and for company’s general purposes.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe debenture’s national scale ratings could be upgraded if (i) Intervias demonstrates sustained better-than-expected operational performance and (ii) a reduction in the linkages and the transfer of intercompany loans and dividends to the parent company. On the global scale, a positive rating action depends on a similar action on Brazil’s sovereign rating, given the company’s credit profile is liked to that of the Brazilian government due to the exposure to traffic volumes and the purely domestic nature of operations in the toll road business.On the other hand, any addition of debt that causes a significant decline in the company’s credit metrics could prompt a rating downgrade. Negative rating pressure could also result from a potential negative outcome of the ongoing judicial dispute with ARTESP regarding earlier concession extensions.Quantitatively, negative rating pressure would result if:» FFO/debt remains below 20% on a sustained basis» cash interest coverage remains below 2.0x on a sustained basisHeadquartered in Sao Paulo, Brazil, Intervias began its operations in February 2000, upon the signing of the original 20-year concession agreement with the State of Sao Paulo, encompassing state toll roads SP-147, SP-157, SP-165/330, SP-191, SP-215, SP-330 and SP-352. The operation of the seven adjacent roads covers 376 km and encompasses nine toll plazas. The original concession agreement was amended twice, first extending the term for 95 months in December 2006 to re-establish the financial equilibrium upon request of additional work, and more recently upon request of additional work around Itapira, extending the term for an additional 2.5 months, with the final expiration now set for April 2028.Intervias is a subsidiary of Arteris, a holding company with around 3,200 km of operating toll roads under concession in Brazil, consisting of two concessions in the State of Sao Paulo and five federal concessions. The combined traffic reached 632,2 million equivalent vehicles in 2020. As of December 2020, Intervias’ revenue (excluding construction) and adjusted EBITDA represented 17% and 20% of Arteris’ consolidated results, respectively, as Intervias reported net sales of BRL417 million (excluding construction revenues) and EBITDA of BRL348 million.The principal methodology used in these ratings was Privately Managed Toll Roads Methodology published in December 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1244932. Alternatively, please see the Rating Methodologies page on www.moodys.com.br for a copy of this methodology.Moody’s National Scale Credit Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody’s global scale credit ratings in that they are not globally comparable with the full universe of Moody’s rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a “.nn” country modifier signifying the relevant country, as in “.za” for South Africa. For further information on Moody’s approach to national scale credit ratings, please refer to Moody’s Credit rating Methodology published in May 2016 entitled “Mapping National Scale Ratings from Global Scale Ratings”. While NSRs have no inherent absolute meaning in terms of default risk or expected loss, a historical probability of default consistent with a given NSR can be inferred from the GSR to which it maps back at that particular point in time. For information on the historical default rates associated with different global scale rating categories over different investment horizons, please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1216309.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.Information sources used to prepare the rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody’s information.Information types used to prepare the rating are the following: financial data, debt documentations, and public information.Sources of Public Information: Moody’s considers public information from many third party sources as part of the rating process. These sources may include, but are not limited to, the list available in the link http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1258170.Moody’s considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.Moody’s adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody’s considers to be reliable including, when appropriate, independent third-party sources. However, Moody’s is not an auditor and cannot in every instance independently verify or validate information received in the rating process.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.Please see the ratings disclosure page on www.moodys.com.br for general disclosure on potential conflicts of interests.Moody’s America Latina Ltda. may have provided Other Permissible Service (s) to the rated entity or its related third parties within the 12 months preceding the credit rating action. Please go to the report “Ancillary or Other Permissible Services Provided to Entities Rated by Moody’s America Latina Ltda.” in the link http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1274877 for detailed information.Entities rated by Moody’s America Latina Ltda. and the rated entities’ related parties may also receive products/services provided by parties related to Moody’s America Latina Ltda. engaging in credit ratings activities within the 12 months preceding the credit rating action. Please go to the link http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1274882 for a list of entities receiving products/services from these related entities and the products/services received.The rated entity Concessionaria de Rodovias Interior Paulista is part of the CCR Group which accounted for 5% or more of the annual revenue of Moody’s America Latina Ltda. during the preceding calendar year.The date of the last Credit Rating Action was 15/05/2020.Moody’s ratings are constantly monitored, unless designated as point-in-time ratings in the initial press release. 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For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.br.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. 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