NEW YORK--()--Fitch Ratings has assigned an 'A' rating to Maryland Transportation Authority's (MdTA) approximately $138 million 2012 series B&C passenger facility charge (PFC) revenue bonds. In addition, Fitch has affirmed the 'A' rating on MdTA's approximately $62.1 million in outstanding series 2003A and 2012A PFC revenue bonds. The Rating Outlook on all debt is Stable.
KEY RATING DRIVERS
Stable but Concentrated Enplanement Base: Baltimore Washington International Thurgood Marshall Airport's (BWI Marshall) enplanement base has demonstrated a relatively strong resilience to the recent economic downturn. The large presence of low-cost carrier service as well as the overall economic strength of the Baltimore-Washington DC service area has anchored the traffic base. Concentration risk associated with Southwest (Southwest; IDR 'BBB' with a Stable Outlook by Fitch) service exists, and comprises 72% of total enplanements, but is mitigated to some degree by mostly origination and destination (O&D) base at 75% of total enplanements.
Narrow Revenue Stream: The narrow revenue stream and the limited flexibility provided by the PFC receipts represent the primary risk related to these bonds. PFC collections have been applied to more than 90% of passengers historically.
Manageable Capital Needs Largely Funded with Current Borrowing: The airport's capital program, through fiscal 2018, includes a runway improvements project estimated at approximately $278 million, which will be funded with a combination of PFC bonds, PFC pay-go funds and grants.
Moderate Levels of Financial Leverage: As a result of lower than previously anticipated additional borrowing, net debt/cash flows available for debt service (CFADS) when factoring in the current PFC borrowing for the runway improvements project, is estimated at a more moderate 3.97x.
Robust Debt Service Coverage Levels: The airport has historically maintained strong coverage on the PFC lien, with at least 3.97x on the PFC revenue bonds over the last four years (through fiscal 2012). When including the current additional borrowing, Fitch projects debt service coverage to dilute to a still relatively strong 2.8x.
WHAT COULD TRIGGER A RATING ACTION
--Additional leverage that would result in deterioration of debt coverage ratios to levels inconsistent with the current ratings. In particular, PFC debt service coverage below 2x and leverage in the 6-7x range would likely result in rating pressure.
--Increased volatility in the airport's traffic, and/or retrenchment by Southwest.
The PFC revenue bonds are secured solely by a first lien on the $4.50 charge assessed on all eligible enplaning passengers at the airport.
The series 2012 transaction consists of the issuance of an estimated $91 million in fixed-rate series 2012B PFC revenue bonds with a final maturity in fiscal 2027 and approximately $47 million in variable-rate series 2012C PFC revenue bonds maturing in fiscal 2032. The interest on the variable-rate demand bonds will be reset weekly and the bonds are expected to be backed by a direct pay letter of credit.
The airport has recently obtained a PFC authorization for additional $342 million to support the airport's airfield projects. Total proceeds from the upcoming new money issuances of approximately $127 million will be used to fund a portion of runway pavement improvements and the construction of the runway safety area, while the remaining project funds will come from approximately $93 million in pay-go PFCs, $53 million in federal grants and $5.2 million in transportation trust fund moneys. Additionally, bond proceeds are expected to fully cash fund the debt service reserve requirements for the series 2012B bonds and to capitalize debt interest costs during construction.
PFC collections for fiscal 2012 totaled approximately $46.6 million, an increase of 3.5% from fiscal 2011, and provided 4.22x coverage. Total debt service requirements, when factoring in the debt and net of the capitalized interest costs, are expected to increase to approximately $15.9 million in fiscal 2013 and remain relatively level thereafter at approximately $13.2 million after the series 2003A bonds mature in fiscal 2013.
Under Fitch's rating case scenario incorporating a 10% enplanement reduction, and assuming higher interest requirements on the variable-rate bonds that would raise total debt service to about $15.4 million annually (after the series 2003 bonds mature), the minimum coverage is estimated to decrease to 2.8x over the medium term. This coverage level is slightly more favorable than previously assumed due to reduced overall debt issuance as a result of higher expected grant funding. Debt per enplanement figures are estimated to rise to a manageable $17.60 when including the new debt, compared to the currently low $5.50.
For more information on the airport and its recent performance, please refer to Fitch's press release dated Oct 2, 2012.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Rating Criteria for Infrastructure and Project Finance' (July 12, 2012);
--'Rating Criteria for Airports' (Nov. 29, 2011).
Applicable Criteria and Related Research:
Rating Criteria for Infrastructure and Project Finance
Rating Criteria for Airports