The rating reflects the strength and resilience of
Key Rating Drivers:
Large O&D Base With Diverse Rental Car Company Market: Massport serves a strong economic base, and is the dominant air transportation facility for the
Concession Agreement Sets High Barriers to Entry & Provides Pricing Flexibility: The 15-year ConRac concession and lease agreements apply to all nine rental car companies expected to service Logan passengers. The airport is able to adjust the rate as needed to cover costs and meet coverage but the actual rates charged to on- and off-airport operators are currently different. The leases include a contingent rent provision allowing for additional rent to be collected from project tenants in order to meet obligations in the event of a shortfall in revenue, which Fitch views favorably. However, the CFC revenue stream supporting ConRac bonds is somewhat narrow, with direct reliance on car rental transaction activity to generate pledged revenue.
Protections in Place through Construction: Structural protections and project controls are in place to mitigate construction and associated delay risks. The ConRac facility is being built using construction manager at-risk agreements along with guaranteed maximum price (GMP) terms. To date construction is on-time and on-budget.
Strong Financials but Somewhat Elevated Leverage: The project benefits from strong net senior debt service coverage of 2.49x in fiscal 2013 (ended
--Material declines in rental car activity supported by the O&D component of the airport's traffic base could weaken credit quality and result in negative rating action;
--Inability to maintain sound coverage metrics for the senior lien ConRac bonds as well as adequate CFC cash flow generation to meet all obligations would pressure the rating.
Series 2011 bonds are secured by a pledge of the CFC collections received or receivable by the authority and any contingent rent paid by the rental car companies as well as insurance proceeds and condemnation awards. In addition, the authority has pledged the amounts on deposit in the project fund, debt service fund, and reserve funds created under the terms of the CFC trust agreement.
The ConRac project involves development of a consolidated facility in the southwest service area (SWSA) of the airport to integrate airport-related rental car operations and facilities into one, making for more efficient operations. Transportation from the airport terminals to ConRac will be served by a unified shuttle bus system. The facility will include a four-level 1.2 million square-foot garage that can hold up to 3,200 rental car parking spaces, a customer service center, and four rental car service and storage areas.
Construction began in
The CFC debt is secured by a somewhat narrow revenue stream that is contingent upon strong performance in rental car activity. The current
Fiscal 2013 visiting O&D enplanement growth was essentially flat remaining at 6.6 million following a 2.7% increase in fiscal 2012 and a 9% increase in fiscal 2011. Transaction days at the facility stood at 4.9 million, up 2.1% in fiscal 2013. Fiscal year-to-date through March, transaction days are up 2.2%. Transaction days have historically demonstrated a higher degree of volatility than O&D enplanements through economic cycles. However, Fitch notes that the authority has the ability to ensure that all obligations are met by charging a contingent rent to tenants and/or by increasing CFC rates, in addition to all the reserve funds supporting the project.
Fiscal 2013 senior debt service coverage is strong at 2.57x on a net revenue basis and 2.87x including the rollover and supplemental funds. Under Fitch's base case forecast which assumes moderate growth through fiscal 2018, net senior debt service coverage is projected to be in the 2x range. Under Fitch's rating case scenario that assumes a 12% reduction in transaction days and no recovery thereafter, net coverage is estimated in the 1.7x range.
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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