NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the 'A' rating on the Greater Orlando Aviation Authority (GOAA), Florida's approximately $33.73 million special purpose facility taxable revenue bonds series 2009 (the Rental Car Facility Project bonds). The Rating Outlook is Stable.
The rating reflects the consolidated rental car facility's (CONRAC) strong and sizable rental car market in Orlando, rate setting flexibility, adequate fund balances for upcoming capital projects, and stable history of customer facility charge (CFC) collections generating debt service coverage ratios (DSCRs) comfortably above 2.0x
KEY RATING DRIVERS
Sizable Rental Car Market: Orlando benefits from a sizable O&D market (95% of total enplanements), and is the largest rental car market in the U.S. by gross revenues. Visiting traffic is driven by the geographically dispersed nature of Orlando's business centers and theme parks, making rental cars an attractive and necessary transportation link. However, there is some vulnerability of demand for car rentals from exposure to the leisure market and more general declines in activity due the slow-recovering economy.
Strong Rate Setting Flexibility: The airport has a competitive $2.50 CFC rate with no anticipated increases through debt maturity in October 2017. GOAA has the flexibility to modify its CFC rate at any time without the need for outside approval. GOAA's facility also benefits from car rental facility agreements executed by all rental car operators serving at the airport.
Conservative Debt Structure: Debt is all fixed rate, with level annual debt service obligations and a short maturity profile with bonds maturing in October 2017. No additional CFC-backed borrowing is currently anticipated.
Minimal Leverage and Strong Coverage: Minimal leverage levels, with a cash positive 2013 net debt to cash flow available for debt service (CFADS) (excluding funds committed to capital projects). Coverage is stable at or above 2.0x with no dependence on transaction growth. The bonds benefit from strong liquidity reserves, with $64 million in reserves as of May 31 2014.
Modern Facilities: The CONRAC has been in operation since April 2010, with minimal capital spending needs for the existing facility. The program is expected to be fully funded with internal liquidity, and management indicates that no CFC-backed borrowing will be needed to complete this project.
Peer Group: Rated peers include CONRACs at Miami Airport (rated 'A-' by Fitch) and Charlotte ('A') due to similar market share distribution and financial metrics, with GOAA and Charlotte benefiting from lower overall leverage.
Negative - A considerable drop in rental car transactions (20 -30%) could adversely affect pledged revenue and coverage levels absent an increase in the CFC rate.
Negative - Future borrowings that materially affect coverage and leverage metrics.
Positive - Given the limited nature of the CFC revenue stream, the current rating is unlikely to migrate to a higher level.
Orlando's CFC rate of $2.50 continues to compare favorably to CFCs charged at other large airports, and Fitch believes this rate level is more than sufficient to meet GOAA's existing special facility debt obligations going forward at current traffic levels. Orlando's CFC revenues totaled $23.2 million in fiscal 2013, down 2.3% from fiscal 2012. However, for the first 8 months of fiscal 2014 through May, CFC revenues are up 3.3% over a year prior. Coverage in fiscal 2013 was healthy at 2.4x (2.7x including the fully funded coverage account of $2.4 million).
Fitch's base case assumes transactions are flat at expected 2014 levels for the next three years, while Fitch's rating case includes declines in transaction days of up to 14% over the next three fiscal years. Under both scenarios, pledged revenues generated by the CFC are sufficient to provide 2.2x or greater debt service coverage (2.5x with coverage account) without raising the CFC rate. Fitch notes that GOAA's ability to increase the CFC with board approval only (no need to consult with County officials or concessionaires) provides further downside protection for bondholders.
The car rental project's structural elements provide protection for bondholders. Project liquidity is robust, evidenced by $64 million in aggregate fund balances, equaling over 100% of the total amount of bonds currently outstanding. This includes a $5 million CFC stabilization fund (funded with CFCs already collected at time of issue), $2.4 million coverage fund (funded at time of issue with bond proceeds), $9.4 million debt service reserve fund (funded at time of issue with bond proceeds), and a $47.0 million facility improvement fund (funded with CFCs collected on a go-forward basis, down from $54.5 million a year prior). Furthermore, car rental facility agreements have been executed by all operators serving the airport. The agreements run until 2015 with two one year extensions, concurrent with the maturity of the CFC bonds.
The capital improvement program for the CONRAC remains largely unchanged. Projects including a return to terminal road, bus and taxi hold areas, and cell lot are being funded with $18 million from the Facility Improvement Fund (FIF), which has a balance of $47 million as of May 31, 2014. The $75 million South Terminal Automatic People Mover (APM)/Parking facility will be funded with remaining FIF moneys and $28 million in future CFC collections. No additional CFC-backed borrowing is expected to be needed to complete the project, and management indicates that no projects that require additional CFC-back bonds are currently anticipated.
Fitch continues to note that the limited nature of car rentals as the only revenue stream available to service debt as a limiting factor for the rating. Demand for car rentals is exposed to the variability of discretionary spending, more so during an economic downturn, which can affect both the number and duration of rental car contracts. This is particularly true in Orlando, which is dependent on tourism and leisure activity for much of its visiting traffic.
The 2009 bonds are a special limited obligation, payable solely from CFC payments received by GOAA. Bonds are also secured by interest earnings on available funds and other pledged funds. Revenues and other airport funds of GOAA are not pledged to the payment of the 2009 bonds.
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' (Dec. 13, 2013).
Applicable Criteria and Related Research:
Rating Criteria for Infrastructure and Project Finance
Rating Criteria for Airports