The rating reflects a revenue stream supported by a sizable rental car market with growth in transactions, a demonstrated five-year operating history, competitive customer facility charge rates with flexibility for adjustments, and stable financial performance including rising fund balances, debt coverage exceeding two times and project leverage moderating to below five times. No further CFC rate increases are projected to be needed to maintain or grow current coverage levels given the flat debt service profile. Volatility in rental car utilization and use of significant portions of residual cashflow to cover operating costs and other loan related project obligations constrain the rating.
KEY RATING DRIVERS
Strong Rental Car Market with Some Volatility: A sizable underlying local market supports a high level of rental car transactions with 15.7 million O&D passengers. Annual rental car transactions exceed 6.3 million, although the underlying activity and CFC collections have exhibited volatility in recent years. Airport traffic at
Adequate Rate Setting Flexibility: Imposition of the rental car customer facility charge (CFC) has been effective since 2005 and covers all car rental operators whether located on-airport or off. The CFC is assessed without cap or sunset by an ordinance of the
Strong Security Package and Sound Reserves: The project structure is underpinned by a first lien on CFC monies and, if needed, contingent rent levied to the rental car operators. While the secured revenue stream is narrow in its nature, dedicated project reserves are robust including a cash funded debt service reserve that is supplemented by a debt coverage account, renewal/replacement reserve, and surplus fund.
Elevated Project Leverage but Healthy Coverage on Senior Bonds: The project's overall leverage, including the revenue bonds as well as a
Modern Infrastructure: The completion of the project negates construction risk with minimal capital expenditures over the intermediate term. The original project faced higher total costs than initially planned and resulted in the project assuming a subordinate loan. The car rental project support is enhanced by facility agreements which were signed by all rental car companies serving the airport. These agreements extend to the end of the maturity of the outstanding bonds.
Demand Shifts: Any material changes in rental car demand or its volatility in the underlying O&D traffic base;
Costs and Leverage: Higher than expected cost increases or unexpected additional borrowings that pressure the CFC rate in order to recovery all project costs
The bonds are secured by payments received by the issuer from the city of
Rental car transactions are rebounding at a robust rate with 21% total growth in rental transaction days since 2010. Fiscal 2013 growth was sound at 3.7% bringing transaction days to 6.34 million. Fitch projects growth to continue, albeit at a more moderate 1%-2% through the forecast period given the continued enplanement growth experienced at the airport. Still, the volume of rental car demand is volatile as Fitch notes that car rental transaction days declined by 15% from 2008 to 2010 even though passenger traffic reductions were at a far lesser scale.
The CFC rate is currently set at
Currently, project reserves are quite strong at over
The car rental facility project was completed in late 2009 and has over three years of successful operations. All rental car companies serving
Additional information is available at 'www.fitchratings.com'.
--'Rating Criteria for Infrastructure and Project Finance' (
--'Rating Criteria for Airports' (
Rating Criteria for Infrastructure and Project Finance
Rating Criteria for Airports
Source: Fitch Ratings
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