NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned an 'A' rating to Broward County, FL's approximately $446.9 million series 2013A, B & C airport revenue bonds issued on behalf of Fort Lauderdale-Hollywood International Airport (FLL or the airport). In addition, Fitch has affirmed the approximately $1.14 billion in outstanding airport revenue bonds at 'A'. The Rating Outlook is Stable.
KEY RATING DRIVERS:
Domestic O&D Anchors Traffic Base: FLL is the leading domestic O&D airport serving south Florida with over 11.7 million enplanements in fiscal 2012 (ended Sept. 30). Year-to-date fiscal 2013 enplanements through nine months are up 1.5%. Carrier service is well-diversified across several low-cost carriers, with none accounting for more than 20% of traffic in fiscal 2012. Some historical volatility in traffic is evident given the leisure-oriented market FLL serves, but passenger trends are largely positive. However, the airport is exposed to potential competition from both nearby Miami International and Palm Beach Airports.
Revenue Risk: Resilience - Midrange
Sound Rate-Setting Structure: The airport currently utilizes a residual use agreement that runs through fiscal 2016, which ensures that the airport can pass on all costs to customer airlines. While current airline costs are very low at $4.03 per enplanement, the dependence on volume-driven revenues to support a large-scale capital program could lead to higher than planned rates under weaker traffic conditions. Nevertheless, Fitch estimates that in such a scenario, FLL's airline costs will remain competitive versus competing airports.
Revenue Risk: Price - Stronger
Debt Structure is Conservative: All airport debt is fixed rate with a flat-to-declining profile and secured by a first-lien on general airport revenues. The series 2013A, B & C bonds will add approximately $28 million-$30 million debt service annually through maturity in 2043.
Debt Structure - Stronger
Financial Metrics are Adequate: Due to the residual agreement, the airport maintains modest debt service coverage levels based on current operating revenues. Historically, FLL's liquidity position has been relatively tight, and airport leverage (defined as the ratio of net debt-to-cash flow available for debt service (CFADS)) will rise to around 13x in conjunction with the series 2013ABC issue before falling back in the medium term to within the 7x-10x range Fitch would normally expect for a mid-size 'A' category airport.
Debt Service and Counterparty Risk - Midrange
Significant Capital Spending Underway: The extension of the airport's second runway as well as terminal expansion and redevelopment will come at a cost of $2.3 billion. While PFCs, grants, and additional commercial revenues are expected to fund much of the additional debt-related costs, traffic underperformance could translate to higher than planned airline charges.
Infrastructure Renewal and Development - Midrange
--Weaker than expected traffic performance, translating to higher than planned airline charges, could negatively pressure the rating; the airport is now more vulnerable to weak traffic performance given increasing leverage;
--Higher than expected costs or lack of successful execution of the capital program;
--Management's willingness to implement airline rate adjustments if necessary, to meet rising debt costs, increased expenses, or weaker than expected traffic-driven commercial revenues;
Pledged revenues consist of the net revenues of the airport system, which includes FLL and North Perry Airport, a small general aviation facility.
FLL is issuing approximately $446.9 million of series 2013A, B & C airport revenue bonds to fund a portion of its $2.3 billion capital improvement program (CIP). The proceeds from the series 2013A & B bonds will fund a number of near-term capital and land acquisition projects for Terminal 4 and the associated ramp, construction of Concourse A in Terminal 1, terminal renovations, a maintenance facility, and a shuttle/ground transportation facility.
The series 2013C bond proceeds will fund approximately $205 million of the estimated $791 million cost of the Runway Expansion Program. The airport expects to issue an additional $764 million to fund the remaining CIP in the next three years.
For more information, please see Fitch's press release 'Fitch Rates Broward County, FL's Airport System Rev Bonds 'A'; Outlook Stable'; dated June 20, 2013 and available at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--Rating Criteria for Infrastructure and Project Finance (July 12, 2012);
--Rating Criteria for Airports (Nov. 27, 2012).
Applicable Criteria and Related Research:
Rating Criteria for Airports - Effective Nov. 29, 2010 to Nov. 28, 2011
Rating Criteria for Infrastructure and Project Finance