Standard & Poor's Ratings Services has assigned 'B' preliminary rating with stable outlook on the proposed $175-million series 2010-1 notes due 2022 to be issued by Manila Cavite Toll Road Finance Company (MCTFC).

In a statement, one of the three international credit rating companies said it will assign a final rating on receipt and satisfactory review of all final project and finance documentation, as well as tax and legal opinions.

“The preliminary rating on the proposed notes reflects the execution risk of not completing construction of the toll road extension on time, the project's dependence on strong traffic growth to meet debt service, especially during the ramp-up period,” Allan Redimerio, S&P's credit analyst said.

He added MCTFC's toll rates are high relative to other roads in the vicinity, and weak cash flow from operations during the ramp-up period were also considered in its preliminary rating.

“These weaknesses are balanced by the long-term potential traffic upside of the toll road, the solid long-term concession agreement, which benefits from some government support, and adequate liquidity provided by debt service, operation and major maintenance reserves,” Redimerio said.

S&P said the stable outlook reflects the favorable demand fundamentals for the toll road and the establishment of debt service reserves that cover interest during the construction and during the first 18 months of the ramp-up period when cash from operations is forecast to barely cover interest payments.

Proceeds from the note issuance will be used to finance the completion of the road extension, repay bank loans taken to finance the project, and fund certain reserve accounts.

The Manila Cavite Toll Expressway, popularly known as the Coastal Road, is a tolled expressway running south from Parañaque City in Metro Manila to the province of Cavite.