The 'AA' revenue bond rating reflects Massport's strong financial performance anchored by
The affirmation of the 'A+' PFC revenue bond rating reflects the aforementioned credit strengths of Logan, proven ability of strong PFC collections, short debt tenor and low existing leverage that provides for high coverage levels offset by the limited revenue stream and its inherent volatility due to its direct correlation with passenger volume.
KEY RATING DRIVERS
Very Strong Operational Profile: Strong economic underpinnings of the service area support healthy demand for the authority's transportation and commerce related business lines. Airport passenger trends continue to demonstrate solid positive growth, with 14.6 million enplanements in fiscal 2013 (ended
Well-Structured Cost Recovery Framework: The leases and rate-setting approach with airlines and other commercial users of the aviation and maritime divisions allow for both strong recovery of costs and flexible control of facilities. Airline costs, at
Manageable Infrastructure Needs With Minimal Borrowings: The authority maintains a strong infrastructure development program with manageable capital requirements (slightly over
Conservative Debt Profile: Following the issuance of the series 2014 new money and refunding bonds, nearly 90% of the authority's debt will be in fixed-rate mode with a descending debt service profile. All bond reserves are expected to be cash funded. Debt Structure: Stronger
Strong Financial Metrics: Debt levels were moderate relative to the airport's fiscal 2013 enplanement base (
Substantial PFC Debt Coverage: A sizable O&D air traffic market supports a large annual PFC collection base in excess of
--Elevated volatility in aviation and maritime operations that leads to deteriorating financial metrics could weaken credit quality;
--Increased costs that contribute to a deterioration of coverage levels (below 2x) and liquidity margins to levels inconsistent with the rating category would lead to a downgrade;
--A material increase in the capital program size or borrowing needs, beyond current expectations, may pressure the rating.
Massport's revenue bonds are secured by the net revenues generated from port authority properties. This includes
The series 2014 fixed-rate bonds are scheduled to price on or around
Logan remains the centerpiece of Massport's properties, generating approximately 87% of total operating revenues in fiscal 2013. The maritime properties generate the bulk of the remaining operating revenues. Logan served over 14.6 million enplaned passengers in fiscal 2013, a 0.4% improvement over fiscal 2012. The rebound trend has softened since 2011 but passenger traffic continued to rise, up 4.5% through the nine months in fiscal 2014 over the same period in fiscal 2013. Domestic enplanement growth from low cost carriers, particularly with JetBlue Airways, continues to be the leading contributor to the rebound.
Infrastructure improvements over the past decade, both at the airport as well as access roadways into Logan, have served to make the airport a more attractive facility. The improvements have enhanced Logan's competitive position relative to nearby airports in
Port operations depend on a blend of container throughput, automobile processing, bulk cargo, and cruise passengers. While container and cruise volumes have performed well over the past decade, some volatility exists with respect to the bulk and automobile segments. Massport previously anticipated operational and financial growth in the port property division due to new container line services. However, stagnant economic conditions have resulted in a less near-term optimism for container volume growth. In fiscal 2013, the port division generated
Massport has a proven track record of managing its infrastructure needs and it's most recently developed five year capital program through 2018 of just over
The new money portion of the 2014 bonds issuance will be used to partially fund roadway improvements, construction of a new parking garage at Framingham Logan Express, post security corridors between Terminals C and E and the replacement of certain electrical substations. The only future planned bond issue that Fitch understands is currently contemplated is approximately
Financial metrics continue to demonstrate strength and resiliency as evidenced by DSCR of 2.47x and 2.21x, in fiscal 2013 and 2012, respectively. This performance may trend slightly downward due to higher debt service costs over the next few years, but is expected to remain very strong for a large hub airport. The authority aims to maintain a minimum of 2x coverage. Massport reported unencumbered liquidity of in excess of
Airline costs per enplanement (CPE) have stabilized since 2009 and were reported at
The bonds secured by the PFC collections mature in 2017. Pledged PFC collections totaled
Additional information is available on 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
Saavan Gatfield, +1 212-908-0542
Source: Fitch Ratings
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