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Investing.com -- Moody’s Ratings has upgraded the corporate family rating (CFR) and the probability of default rating (PDR) of Obrascon Huarte Lain S.A. (OHLA) to B3 from Caa2 on March 12, 2025. The upgrade also extends to the instrument rating on the existing backed senior secured notes, issued by subsidiary OHL (BME:OHLA) Operaciones S.A.U., which has been raised to B3 from Caa2. The outlook for both entities remains stable.
The reason behind this upgrade is OHLA’s stronger and more sustainable capital structure following its recapitalisation in February 2025. Moody’s noted that OHLA’s debt-to-EBITDA ratio has dropped to 2.5x for the 12 months leading up to December 2024, down from 3.5x. The company has also extended its debt maturity profile to December 2029 from March 2026 and fully repaid a €40 million ICO-backed bank loan due in March 2025.
Despite these improvements, Moody’s also notes that the B3 rating incorporates the company’s volatile cash flow generation over the last years and its complex structure, which includes large investments in concession joint ventures that require continued cash injections. A significant portion of OHLA’s reported cash (€346 million as of December 2024) is tied up in these joint ventures and is not immediately available.
The rating also acknowledges OHLA’s improved liquidity profile, with access to €75 million net cash proceeds from the recapitalisation transaction and €90 million net proceeds from a favorable arbitration ruling related to Doha metro stations. Additionally, a new shareholder has committed to €50 million in subordinated convertible notes with a 6-year maturity, providing additional liquidity support.
Moody’s expects OHLA to sustain leverage around 2.5x and robust interest coverage between 2.5x and 3.0x over the next 12-18 months, which contributes to the stable outlook. This outlook also assumes that OHLA will maintain solid liquidity and adhere to disciplined financial policies, focusing on smaller projects within the resilient public infrastructure sector in regions where it has established strong business acumen.
The ratings could be upgraded if OHLA enhances its liquidity through consistent positive free cash generation and maintains disciplined financial policies. Conversely, the ratings could be downgraded if the liquidity materially deteriorates due to consistent negative free cash flow or substantial investments in concessions.
OHLA’s liquidity profile has improved over the past year, alleviating pressure to execute its disposal pipeline for refinancing purposes. The company has access to liquidity buffers, including €50 million allowed revolving credit facilities for working capital purposes and new shareholder commitment to up to €50 million subordinated convertible notes.
The company’s capital structure consists of €328 million outstanding backed senior secured notes due in December 2029, issued by OHL Operaciones S.A.U., a subsidiary of OHLA. The backed senior secured notes are guaranteed by operating subsidiaries that generate at least 90% of the group’s revenue.
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