‘Removal of negative status next project’

Having succeeded in getting its airport revenue bonds off the credit watch list, the Commonwealth Ports Authority now has its eyes set on reversing the negative outlook given to its bonds by Fitch Ratings.

CPA executive director Carlos Salas expressed confidence yesterday that Fitch would give CPA a better outlook rating if the authority manages to comply with its bond coverage ratio this year.

“We got the negative outlook because of our two years of noncompliance to the debt service coverage requirement. We finally met the requirement in 2004; perhaps another year of compliance will make Fitch more comfortable,” Salas said.

International credit rating agency Fitch Ratings announced on Monday that it has removed CPA from negative watch, following CPA’s rebounding enplanement levels, recovering financial position, and the scheduled implementation of a $4.50 terminal fee in 2005.

Fitch also affirmed the “BBB-” rating on CPA’s $17.9-million airport bonds. CPA, however, received a negative rating outlook, which indicates that Fitch is more likely to downgrade CPA’s rating over the next one to two years.

“The negative outlook is based on concerns regarding CPA’s willingness to raise airline fees in a timely manner and avoid future technical defaults, long-term ability to preserve adequate liquidity and uncertainty regarding funding for future capital improvement projects,” Fitch said.

For fiscal year 2005, CPA has projected to generate net income that exceeds its required bond payment by 90 percent, or a bond coverage ratio of 1.90x. CPA’s required bond coverage ratio is 1.25x. In FY 2004, CPA a debt service coverage of 1.26x.

“It’s a very conservative projection. We have been advised that it’s better to be conservative at this type of environment, especially with passenger traffic,” Salas said.

To meet its target, CPA plans to continue reducing costs in the three CNMI airports and developing other sources of revenues, particularly in the area of concession income, Salas said.

He said CPA is looking at working with the Transportation Security Administration to have all screening lanes operating at the Saipan International Airport.

“We want to get the passengers in the hold room area as soon as possible so they can spend money up at the duty free shop, restaurants, and sports massage center up there,” Salas said.

He added that the scheduled implementation of the $4.50 passenger facility charge on Jan. 1 is expected to boost CPA’s financial standing.

Revenues from the fee will fund CPA’s 10-percent share in airport improvement projects funded by the Federal Aviation Administration, as well as CPA’s bond payments.