S&P Rates Tuneles Concesionados de Acapulco 'mxAA'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Standard & Poor's

March 1, 2001-- Standard & Poor's today assigned its 'mxAA' rating to Tuneles Concesionados de Acapulco, S.A. de C.V.'s (TUCA) 61.6 million unidades de inversion (UDIs) (MxP180 million) certificados de participacion (CPOs), series A. The outlook is stable.

The series A CPOs are secured by net toll road revenues. TUCA is the private owner of the toll tunnel that provides access to the city of Acapulco from the outlying suburbs. TUCA received a 25-year concession on July 7, 1994 from the state government of Guerrero to construct and operate the toll tunnel (Maxitunel de Acapulco). The CPOs have an amortization schedule of 15 years, with principal payments beginning in 2001.

Rating strengths include:

-- Legal provisions that include a closed lien on revenues and bondholder
protection in the event of a TUCA bankruptcy;

-- No dependency on traffic growth to meet all future debt service payments
with current traffic levels providing a minimum of 1.3 times (x) coverage in
all years;

-- Reserve funds equal to 18 months of debt service payments funded by 2003;

-- TUCA's continued investment in the project, which will not be fully
recovered until the bonds have been paid and TUCA's subordinate position in the
flow of funds; and

-- Principal repayment that begins immediately in 2001 with level debt service
occurring after 2002.

The rating additionally reflects the following concerns:

-- Limited operating and traffic history since the tunnel's

opening in 1997;

-- TUCA's inability to raise future toll rates above the national

inflation rate (no real increases) that will result in no

additional revenues without traffic growth;

-- High discretionary use of the tunnel, accounting for 58% of

trips during the week and 66% of weekend trips according to a

traffic study completed in September 2000, although September

tends to experience more tourism-related traffic than other

months;

-- Revenue dependence on a single-asset toll road and the

existence of a free alternative road (Av. Del Tiburon), which

despite a time savings of 8.5 minutes, the distance of the

free road is only 1.3 kilometers longer and is still used

predominantly by local residents commuting to work in

Acapulco;

-- Expensive tolls with an average trip for residents at MxP28

(MxP9.33 per kilometers), or approximately US$3; and

-- Concerns that state economic development interests could

interfere with toll road operations, such as limited toll

increases or ultimately, a take-over of the tunnel.

The Maxitunel de Acapulco consists of a single, four-lane tunnel that passes through the mountains surrounding Acapulco. It provides access from the outlying suburbs to the downtown commercial and tourist areas of Acapulco. It also provides access to the beaches from Mexico City. Tourists from the capital provide a large amount of the tourism in Acapulco during the summer and winter holiday periods. Acapulco is a city of 1.5 million inhabitants. While international tourism is a constant presence in Acapulco, domestic tourism has increased substantially since the early 1990s.

The tunnel opened in 1997, providing a quicker alternative to the existing free two-lane road that passes over the mountains. The free road is only 1.3 kilometers longer than the tunnel, creating some competitive concerns. This road is congested with residential and commercial traffic, however, and on average, takes 8.5 minutes longer than the tunnel to reach Acapulco from outlying areas.

The legal structure of this financing offers bondholder protection because the owner of the concession, TUCA, is located last in the flow of funds, behind debt service payments. No additional bonds may be issued with a parity lien on net revenues. Bondholders are offered the additional protection of a contingency reserve that is funded with an initial deposit of 3.5 million UDIs, or approximately MxP10 million, funded up to 10.5 million UDIs, or approximately MxP40 million by 2002. The total of 10.5 million UDIs is equal to approximately one year's debt service. Once the contingency fund is funded, excess revenues will be deposited in the series X reserve. The combined total of the contingency fund and the series X fund is required to provide 1.5x the following year's debt service before any distributions of surplus revenues to TUCA can be made. After the two funds reach the required amounts, excess annual revenues may be paid to TUCA. Under the traffic consultant's pessimistic case scenario (traffic growth based on projected population growth in the region), TUCA is forecast to receive payouts as early as 2002, when the contingency and series X reserve are expected to be fully funded. Bondholders are removed from the risk of TUCA or a takeover of the road by Caminos y Puentes Federales (CAPUFE) since, legally, the rights of the bondholders must be respected under any scenario. The Mexican government has historically honored similar obligations in the past, and it is Standard & Poor's expectation that the bonds will continue to be paid even in the event of bankruptcy or a premature government takeover of the road.

The strength of the rating reflects the adequate coverage of debt service provided by current traffic levels. This strength mitigates the risk associated with variable historical traffic levels, high discretionary use of the tunnel, and a free alternative with a minimal time difference. With no growth from 2000 traffic levels and no toll increases above inflation, revenues are projected to be sufficient to provide a minimum of 1.3x coverage over the life of the debt. Initial years have higher coverage at 1.54x forecast in 2001 and 1.43x in 2002. The debt service reserve fund, equal to 18 months debt service, will be fully funded by 2003. The lowest coverage is projected in 2006 of 1.29x coverage under the no-growth scenario.

The pessimistic growth scenario forecasts average annual traffic growth equivalent to 1.97%, based on population growth estimates, which is more likely than the no-growth scenario given growth in the service area and historical increases in tourism. This traffic growth would produce higher coverage of 1.68x in 2001 and increasing thereafter and the debt service reserves would be funded by 2002.

OUTLOOK: STABLE

The outlook reflects the expectation that demand for the tunnel is expected to remain at a minimum of current levels, which will in turn produce adequate debt service coverage from annual net revenues with a rapid amortization of debt over the next 12 years. No additional refinancings are anticipated, Standard & Poor's said. -- CreditWire