Fitch upgrades rating for CPA bonds

Global rating agency Fitch Ratings has upgraded the rating of about $14.5 million in airport revenue bonds of the Commonwealth Ports Authority and revised its rating outlook for CNMI airports and seaports from “negative” to “stable.”

The rating for outstanding CPA series 1998A airport revenue bonds was raised from “CCC” to “B-“ to reflect compliance with the bond agreement. The airport rating outlook is revised to “stable” primarily due to the improvement on the passenger facility charge, which was designated as gross revenue of the agency through a board resolution passed in 2011.

Fitch said that the upgrade to “B-“ reflects the CPA management’s actions to stabilize its operating profile and meet covenant obligations. Following three years of negative debt service coverage, CPA exceeded its 1.25 debt service coverage in fiscal years 2009 and 2010 and is expected to have coverage of approximately 2.37 for fiscal year 2011. Improved coverage levels are the direct result of the CPA’s increase in airline rates and charges in fiscal year 2009 and FAA approval to use 100 percent of PFCs collected as gross revenues, as well as restrained growth in operating expenses.

“Fitch cites our recent history of maintaining compliance [2009 to present] as compared to the previous years of negative debt service coverage. Moreover, Fitch cites effective control of operating expenses and the innovative usage of PFC revenues as further factors,” said CPA’s comptroller Derek Sasamoto yesterday.

Fitch also affirmed its BB- rating for the seaport and upgraded its outlook from “negative” to “stable,” which means Commonwealth seaports are expected to not have any difficulty in making debt service payments and that cash flows are, in Fitch’s view, sufficient to cover debt service through its five-year forecast period.

Sasamoto said the rating agency “takes comfort in the CPA’s strong liquidity, and fixed rate, flat debt service profile.”

Sasamoto told Saipan Tribune that Fitch comments on the overall credits of CPA “are a true illustration” of the results that are achievable through sincere hard work, commitment, financial discipline, and innovation.

“For CPA to achieve the success and progress it has experienced toward the end fiscal year 2009 to the present amidst dismal global economic conditions is a testament to the effectiveness of CPA’s leadership and financial management,” he said.

Fitch pointed out that CPA has been successful in controlling operating expenses and that cash reserves have increased, thereby increasing cash on hand. As such, Fitch is confident CPA will “remain at or above covenant [required debt service coverage] through a five-year forecast period.”

According to Sasamoto, for Fitch to publish this type of confidence in the finances of CPA illustrates the efforts of CPA’s dedicated workforce and commitment to financial excellence.

“Moreover, for Fitch to recognize CPA’s efforts in the utilization of PFCs further affirms CPA’s success and commitment to financial innovation. This achievement itself required extensive and exhaustive efforts on the part of CPA and to be recognized for it illustrates the benefits of sincere effort as well,” he added.

Sasamoto shared that he was told by the Fitch analyst assigned to CPA’s review that upgrades were rare this year and that CPA was one of the few clients that received an upgrade.

When asked about CPA’s plan to fully achieve a positive rating outlook, Sasamoto said the agency will continue to be proactive in managing its finances. A healthy balance sheet for CPA, he said, signifies success as CPA’s goal is to support its employees, clients, and customers and to ensure effective and proper facilitation of aviation and maritime activities.