The rating reflects a growing visiting origin and destination (O&D) base at
KEY RATING DRIVERS:
Stable Long-Term Demand Profile: The consolidated rental car facility project serves a sizeable and growing metropolitan region, with approximately 2 million visiting origination and destination (O&D) deplanements annually.
Adequate Rate-Making Flexibility: The airport's current customer facility charge (CFC) rate of
Elevated Leverage Initially, With Adequate Financial Metrics: The project's leverage at 10.6 times(x) net debt-to-cash available for debt service (CFADS) based on 2013 CFC revenues is relatively high, but is expected to drop to the 6x-7x range by 2022. Debt service coverage ratios are estimated at around 1.7x excluding rolling coverage. Maintaining these leverage and coverage levels will require ongoing revenue growth in CFCs over the life of the bonds through CFC rate adjustments or higher annual level of transaction days, as annual gross debt service increases approximately 1.9% annually in the 2014-2042 period.
Strong Security Package: The structure is underpinned by a first lien on CFC monies and, if needed, contingent rent, a closed loop of funds, and cash-funded project reserves. In the event project leases are terminated, CFC receipts remain property of the trust and will continue to be remitted without set-off or abatement. Operating expenses, major maintenance and other items are subordinate to debt service.
Modern Infrastructure: Construction risk is largely mitigated by CFC revenues that are already in place, coupled with a guaranteed lump sum contract, 6% contingencies, 100% payment and performance bonds, and adequate cash reserves. Construction of the project is currently 36% with an expected completion date in
--Changes in rental car demand, or volatility in the underlying O&D traffic base, that lead to performance that is materially above or below indicated projections may change the rating.
--Additional leverage to support project construction, including the use of completion bonds, may cause negative rating pressure.
--Use of fund balances beyond those anticipated in the sponsor's forecast or imposition of contingent rents to rental car companies in order to fully support project cashflow requirements under the bond documents and rental car concession agreements may negatively impact the rating.
The series 2013 bonds are secured by a pledge of the
Airlines serving the airport offer 146 daily departures and provide nonstop service to 37 markets. The airport is served by five traditional hub-and-spoke carriers, four low-cost carriers, and nine regional carriers, as well as four all-cargo airlines. Southwest Airlines (Southwest) is the largest carrier at the airport in terms of passenger activity, accounting for 39% of deplaned passengers in fiscal 2013, followed by American Airlines with 19%. There is some competition for passengers in the air trade area, with
Fiscal 2013 destination O&D deplanements grew by 5.1%, reaching 2 million. This level, a new peak, represents the fourth year of growth following a decline of 8.8% in 2009. Transaction days at the facility stood at 1.83 million for 2012, up 13% since falling nearly 20% cumulatively in 2009 and 2010. Similar to other ConRacs, transaction days have demonstrated a higher degree of volatility than visiting O&D deplanements through economic cycles. It is Fitch's view that the City 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.
The ConRac facility project consists of two five-level structures connected via vehicle circulation ramps. The facility will be walking distance to the airport's passenger terminal building, located behind the existing parking garage and accessible by a pedestrian walkway across the garage. The ConRac/parking facility will be 1.66 million square feet, including 790 public parking spaces on the ground floor, 1,840 ready/return rental car spaces on three levels of the garage, and 1,152 rental car storage stalls on the roof. The second floor will also include the rental car customer service area. There will be a multi-level quick turnaround facility for fueling and cleaning, including 48 fueling stations and 12 car wash bays. The facility is designed to accommodate 11 rental car companies upon opening; there are currently nine rental car companies operating at the airport. As a result of this ConRac facility, there will be no need for rental car bussing operations. The third level of the existing parking garage, which is currently occupied by rental car companies, will also convert to public parking.
Construction commenced in
The estimated project costs for the facility are
Fitch considers the structural features of the transaction as adequate based on the protections available to mitigate project completion and delay risk. The construction contract was awarded under a guaranteed maximum stipulated sum price of
Management's plan of finance projects debt service coverage ratios (DSCR), excluding coverage and reserve funds, to average 1.66x over the life of the project. This coverage level assumes cash flow will be adequate to meet both bond debt service and all subordinate transfers and payments, including city payments and reimbursements for operations and maintenance, tenant improvements, and base rents. In order to achieve this, the plan of finance assumes 1.8% annual average growth for transaction days through 2042 and 5% increases in CFC rates every three years through 2027. If growth in transaction days or CFC rates slows, Fitch notes that subordinate payments may not be met. Project leverage is also high initially at 10.6x net debt to CFADS, though this drops to the 6x-7x range over 10 years once principal repayment begins in 2017. Fitch ran several sensitivities to the plan of finance, including restricting transaction day growth to 1% per year, freezing CFC rates at the current rate of
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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