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Fitch Affirms Greater Orlando Aviation Auth, FL's Special Facility Revs at 'A'; Outlook Stable

Dépèche transmise le 20 octobre 2011 par Business Wire

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed its 'A' rating on the Greater Orlando Aviation Authority (GOAA), Florida's approximately $56 million special purpose facility taxable revenue bonds, series 2009 (the Rental Car Facility Project bonds). The Rating Outlook is Stable.

Key Rating Drivers:

--Sizable underlying origination and destination (O&D) 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 to the ongoing economic downturn.

--Competitive customer facility charge (CFC) rate: The airport has a competitive $2.50 CFC rate with no anticipated increases through debt maturity in 2017. GOAA has the flexibility to modify its CFC rate at any time without the need for outside approval.

--Fully executed agreements: GOAA's facility benefits from car rental facility agreements executed by all rental car operators serving at the airport. The agreements run concurrent with the maturity of the CFC bonds.

--Conservative debt structure: GOAA has level debt service obligations with a short maturity of seven years, with coverage at or above 2 times (x) with no dependence on transaction growth. The bonds benefit from strong liquidity reserves, with $45 million in cash reserves as of Sept. 30, 2011 (up 55% from original review). No additional bonding is expected. However, there is some vulnerability from the limited nature of car rentals as the sole revenue stream available to bondholders.

What Could Trigger a Rating Action

--A considerable drop in airport traffic operations or in associated rental car transactions could adversely affect pledged revenue levels, and, without an increase in the CFC rate, could lead to degradation in coverage to levels inconsistent with the current rating level.

--Additional leverage on the CFC revenue stream to cover additional improvements to the consolidated rental car facility (CONRAC) could dilute bondholders and have a negative impact on the rating. However, additional capital needs are modest (current balances in the CFC account are sufficient to cover 70% of all estimated future project costs), and additional leverage is viewed as unlikely.

Security:

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.

Credit Summary:

Orlando's consolidated rental car facility was completed on-time and on-budget, and has been operational since April 2010. 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 special facility debt obligations going forward at current traffic levels. Orlando's CFC revenues totaled $22 million in fiscal 2010, up 1% from fiscal 2009. For the first 11 months of fiscal 2011 through August, CFC revenues are up 5.7% over a year prior. Under various stress scenarios, envisaging declines in transaction days of up to 15% over the next three fiscal years with modest 1% recovery per annum thereafter, pledged revenues generated by the CFC are sufficient to provide 2.1x or greater debt service coverage. Including the fully funded coverage account of $2.4 million, coverage increases to 2.3x. This stable, elevated level of coverage provides room for substantial downside risk, and is consistent with an 'A' category rating. 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 structural elements of GOAA's special facility bonds provide protection for bondholders. The bonds benefit from $45 million in fund balances, equaling 80% 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), $9.5 million debt service reserve fund (funded at time of issue with bond proceeds), and a $28.3 million facility improvement fund (funded with CFCs collected on a go-forward basis, up from $14.6 million a year prior). Furthermore, the existence of car rental facility agreements executed by all operators serving the airport also provides some certainty that most, if not all, car rental operators will serve at the airport facility. In the event of mergers between any of the car rental companies, (particularly involving DTG at present), there will be minimal impact on revenues for the CONRAC, as current contracts remain in place through 2017 (coterminous with bond maturity).

While the short maturity, low debt quantum, and structural protections of the special facility bonds allow for a relatively high rating ('A' being the highest rating Fitch has assigned to a car rental facility bond issue), inherent risks to this type of structure place upper limits on the rating. Concerns include the limited nature of car rentals as the only revenue stream available to service debt. Without recourse to airport revenues, it is difficult for the rating to rise above the 'A' category. Furthermore, demand for car rentals is exposed to the variability of discretionary spending in the current economic downturn. This is particularly true in Orlando, which is dependent on tourism and leisure activity for much of its visiting traffic.

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 16 Aug., 2011;

--'Rating Criteria for Airports', dated Nov. 29, 2010.

Applicable Criteria and Related Research:

Rating Criteria for Infrastructure and Project Finance

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

Rating Criteria for Airports

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=578745

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