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Fitch Rates Maryland Transp Auth 2012A PFC Revs 'A', Parking Revs 'A-'; PFC Bonds on Watch Negative

Dépèche transmise le 3 avril 2012 par Business Wire

NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns an 'A-' rating to the Maryland Transportation Authority's (MdTA) approximately $208 million parking revenue refunding bonds, series 2012 A and B. Fitch also affirms the 'A-' on MdTA's outstanding $202 million parking revenue bonds, series 2002. The Rating Outlook is Stable.

In addition, Fitch assigns an 'A' rating on MdTA's approximately $50 million passenger facility charge (PFC) revenue bonds, series 2012A. Fitch places the 'A' rating on MdTA's outstanding series 2003 approximately $22 million variable-rate PFC revenue bonds and series 2012A PFC revenue bonds on Rating Watch Negative.

The Negative Watch on the PFC revenue bonds reflects Fitch's concern that coverage ratios will weaken as a result of the expected issuance of parity PFC revenue bonds to support the airport's runway improvements project. Although the final bond sizing in unknown, the current estimate of $245 million will place downward pressure on the airport's historically high PFC debt service coverage and low leverage levels. Projected PFC leverage is estimated to increase to approximately 7 times (x) and debt service coverage is estimated to dilute to 2x from current levels in excess of 4x. The current borrowing plan calls for the next parity PFC bond to be issued in the summer of 2012. Absent a material change in the project's scope and revenue pledge, an affirmation of the PFC's 'A' rating is unlikely.

KEY RATING DRIVERS

Stable but Concentrated Enplanement Base: Baltimore Washington International Thurgood Marshall Airport's (BWI Marshall) enplanement base has demonstrated a relatively strong resilience to the recent economic downturn. The large presence of low cost carrier service as well as the overall economic strength of the Baltimore-Washington DC service area has anchored the traffic base. Concentration risk associated with Southwest (Southwest; IDR 'BBB'/Stable Outlook by Fitch) service exists, and comprises 70% of total enplanements, but is mitigated to some degree by mostly origination and destination (O&D) base at 75% of total enplanements.

Narrow Revenue Streams on Both Liens: The narrow parking revenue stream is somewhat offset by the airport's moderate flexibility to increase rates if necessary. In the case of the PFC revenue bonds, the narrow revenue stream and the limited flexibility provided by the PFC receipts represents the primary risk related to these bonds. PFC collections have been applied to more than 90% of passengers historically.

Moderate Levels of Financial Leverage: Net debt/cash flows available for debt service (CFADS) is estimated at a moderate 3.3x for the parking bonds, post 2012 refunding. The PFC credit is estimated to have a low net debt/CFADS of 1.47x following the 2012A bond issue, but will be closer to 7x following the second planned PFC borrowing.

Robust Debt Service Coverage Levels: Strong historical coverage on both liens, with at least 2.37x coverage on the parking revenue bonds of at least 3.97x on the PFC revenue bonds over the last three years (through fiscal 2011). Post refunding, coverage on parking bonds is projected at 2.8x in fiscal 2012. Coverage on PFC bonds is estimated at over 3.5x for fiscal 2012, when including series 2012A bonds.

WHAT COULD TRIGGER A RATING ACTION

--Additional leverage on both liens that would result in deterioration of debt coverage ratios to the levels inconsistent with the current ratings;

--Increased volatility in the airport's traffic, and/or retrenchment by Southwest;

--Bankruptcy of the private parking concessionaire that could disrupt cash flows.

SECURITY:

The PFC revenue bonds are secured solely by a first lien on the $4.50 charge assessed on all eligible enplaning passengers at the airport. The parking revenue bonds are secured by all revenues from all parking facilities at BWI Marshall payable to the Maryland Aviation Administration (MAA) by the parking concessionaire.

TRANSACTION SUMMARY

The series 2012 parking revenue bond proceeds will be used to refund all outstanding series 2002 parking revenues bonds with a target of at least 3% net present value savings. Bond proceeds will also be used to fully fund the debt service reserve fund. There will be no change in the final maturity of the refunded bonds (maturing in fiscal 2027) and all debt will be issued in a fixed-rate mode with a descending amortization schedule.

The series 2012A PFC revenue bond proceeds will be used to provide partial funding for BWI Marshall's concourses B and C connector project and the related project, and to fund the debt service reserve fund. The bonds will be issued in a fixed-rate mode with a level debt service profile and the final debt maturity will be extended to July 2032 from July 2013 maturity on the outstanding PFC bonds.

BWI Marshall's enplanements grew at a compounded annual growth rate (CAGR) of 1.9% between fiscal 2006 and 2011 reaching 11.3 million. Enplanements grew 5.4% in fiscal 2011 but have since stagnated, with a slight decline of 0.7% in the first seven months of fiscal 2012(through January) as compared to the same period in fiscal 2011 attributed to continued economic weakness and weather-related service interruptions. Management anticipates ending the fiscal year essentially flat.

The airport recorded a $9.18 CPE in fiscal 2011, below both Dulles and Reagan. The airport's favorable cost structure helps to offset concern regarding the presence of several competing airports in the service area.

The airport has 24,700 parking spaces. The parking rate structure introduced in December 2009 has yielded strong cash flow from parking operations, with debt service coverage of 2.78x in fiscal 2011, an increase from 2.62x coverage in fiscal 2010. As a result of the current refunding and the associated expected debt service savings, coverage is expected to remain in the 2.7x-3x range even under a stressed enplanement growth scenario, with no increases in parking rates. The contract with the parking concessionaire, Maryland Parking Limited Partnership (MPLP), was executed in January 2011 and expires in December 2014. Occupancy levels average approximately 51%. The five operators of the off-airport parking lots have lower parking rates and occupancy rates of roughly 66%.

As the airport currently levies the PFC at the maximum $4.50 rate, total revenues generated from the charge are dependent on the level of passenger traffic at the airport. PFC collections for fiscal 2011 totaled approximately $45.1 million, an increase of 2.2% from fiscal 2010, and provided 4.3x coverage of series 2003 PFC bonds debt service. Under stressed 10% reduction enplanement scenario and assuming the current and proposed bond issues that raise total debt service to about $23 million annually, the minimum coverage is estimated to drop to a significantly lower 1.75x. Current estimates indicate that debt per enplanement figures could rise to the $28 range from the current low $6.

The airport's fiscal 2012-2017 capital improvement program (CIP) totals $714 million. The largest project includes runway pavement improvements and the construction of the runway safety area for $336 million expected to be partially funded with PFC bond issuance in the summer of 2012. The secure side concourses B/C connector project, relocation of the passenger screening checkpoint and widening of concourse C entrance for a total of $99 million will be funded with a combination of pay-go funds, transportation trust funds and the proceeds from the series 2012A bonds.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Rating Criteria for Infrastructure and Project Finance', dated Aug. 16, 2011;

--'Rating Criteria for Airports', dated Nov. 28, 2011.

Applicable Criteria and Related Research:

Rating Criteria for Airports

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656970

Rating Criteria for Infrastructure and Project Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648832

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

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