# Assessment of Ferrovial SA's Suitability for Hybrid Bonds

## Key Financial Metrics Analysis

### 1. **Leverage and Debt Position**
- **Total Noncurrent Borrowings (2023):** €10,776M
- **Total Current Borrowings (2023):** €877M
- **Total Debt:** €11,653M
- **Total Equity (2023):** €6,354M
- **Debt-to-Equity Ratio:** 1.83x

The company has substantial debt levels relative to equity, which could make additional financing more challenging.

### 2. **Profitability and Cash Generation**
- **Profit for 2023:** €302M (2022: €1,336M - a significant decline)
- **Operating Cash Flow (2023):** €1,002M
- **EBITDA proxy (Operating Income + Amortization):** ~€728M
- **Interest Coverage (Operating Income / Finance Costs):** 423M / 320M = 1.32x

The interest coverage is relatively low at 1.32x. Profitability declined substantially year-over-year.

### 3. **Liquidity**
- **Cash (2023):** €5,130M
- **Current Assets:** €7,419M
- **Current Liabilities:** €5,378M
- **Current Ratio:** 1.38x

Liquidity position is adequate with reasonable cash reserves.

### 4. **Capital Structure**
- **Equity Attributable to Owners:** €4,113M
- **Noncontrolling Interests:** €2,241M
- **Equity Quality:** Mixed (significant noncontrolling interests at 35% of total equity)

### 5. **Infrastructure Asset Base**
- **Infrastructure Investments (Intangible Asset Model):** €13,504M
- These represent 71.6% of noncurrent assets
- This is characteristic of infrastructure companies and supports hybrid issuance

## Assessment Factors for Hybrid Bonds

**Positive Factors:**
- Strong operational cash flow generation (€1,002M in 2023)
- Substantial and stable asset base, particularly in infrastructure
- Reasonable liquidity position
- Infrastructure company with long-term contracted revenues
- Noncontrolling interests suggest successful asset monetization capability

**Negative Factors:**
- High leverage (1.83x debt-to-equity)
- Low interest coverage ratio (1.32x) - problematic for additional financing
- Significant profit decline (77% drop year-over-year)
- Finance costs are €320M annually, placing strain on debt servicing capacity
- Already substantial debt burden may limit rating agencies' acceptance of hybrid instruments

## Conclusion

Ferrovial is an infrastructure company with strong operational characteristics and cash generation. However, the combination of high leverage, weak interest coverage, and declining profitability creates constraints. While the infrastructure asset base and operational cash flow are supportive of hybrid issuance, the elevated debt levels and profitability concerns suggest the company would face challenges in placing hybrid bonds at favorable terms. Rating agencies would likely require demonstration of improved profitability or reduced leverage before viewing hybrid issuance favorably.

<answer>Marginally Suitable</answer>