CPA airport revenue bond gets positive ‘B-’ rating, too

The Commonwealth Ports Authority got another positive grade for its airport revenue bonds.
Fitch Rating issued this week a “BB-” rating for CPA’s approximately $30.4 million of outstanding seaport revenue bonds. Outlook is stable. For the airport revenue bonds, the global rating agency gave the ports authority “BB-” rating; outlook remains positive. This “BB-” rating is for the approximately $13 million of outstanding senior series 1998A airport revenue bonds.

The airport bonds are secured by a pledge of gross airport revenues generated by the operations of the airport, including passenger facility charges.

In a news release from Fitch, it said the recent approval by the Federal Aviation Administration to allow the airport to utilize 100 percent of passenger facility charge collections for debt service provides enhanced cushion to manage revenue levels to support financial obligations while keeping airline costs stable. Fitch notes that CPA board resolution No. 2011-01 now designates all PFC revenues as gross airport revenues.

It was noted that as a result of the airport’s improved operations, conservative capital structure, and flat debt service profile, Fitch projects coverage to remain at or above covenant through a five-year forecast period, even when only the eligible portion of PFCs for debt service are applied.

According to the rating agency, CPA’s capital improvement plan is also modest at $44 million through fiscal 2015 and predominantly funded through FAA grants with no future anticipated debt issuances.

“CPA’s capital improvement plan through 2015 is modest at $44 million and 95 percent of the funding comes from FAA grants. The largest project is a $17 million Regional ARFF Training Facility that should be a revenue-generating project for the airports. Other projects include: rehabilitating the 30-year-old runway, installation of new generators for the terminals, tower, and airport fire station, and various renovations to the international and commuter terminal. These are in addition to several future anticipated projects. Management indicated that no future debt issuances are currently planned although the authority does not detail a longer range capital improvement plan so some uncertainty remains over facility needs and funding,” states the Fitch release.

CPA was also found having a conservative capital structure. “The authority maintains 100 percent fixed-rate, fully amortizing debt. Annual debt service payments are essentially level and final maturity on the bonds is in 2028. Debt structure: stronger.”

The “Days Cash on Hand” has also grown significantly over the past four years to 352 days in fiscal 2013.

Fitch indicated the following areas that it marked “rating sensitivities” for CPA: continued improvements in the underlying service area economy and the airports’ ability to maintain or grow its current traffic base; sustained favorable trends in balance sheet liquidity and strong financial ratios over the next year would strengthen CPA’s credit quality; material declines in enplanement volume or in coverage, resulting from increased operating expenses and/or the CPA Board’s failure to sufficiently apply the full collection of PFCs as gross revenues, could pressure the current rating; and identified longer-term capital projects that would rely on debt issuances for funding could lead to rating pressure.