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Fitch Maintains Burbank-Glendale-Pasadena Airport Authority on Rating Watch Negative

Dépèche transmise le 16 février 2012 par Business Wire

NEW YORK--(BUSINESS WIRE)--Fitch Ratings maintains the Rating Watch Negative on the approximately $56 million Burbank-Glendale-Pasadena Airport Authority (the authority) senior lien airport revenue bonds (rated 'AA-' by Fitch).

KEY RATING DRIVERS:

--TRAFFIC BASE TIED TO A STRONG YET HIGHLY COMPETITIVE MARKET: The airport enjoys an origination/destination traffic profile within a wealthy and highly-populated air trade service area which is offset by the competitive nature of the Southern California air service market of which BUR serves a relatively modest component, and the domination of air service by Southwest Airlines (Southwest), which provided 66% of the airport's overall service for fiscal 2011.

--STRONG COST RECOVERY FRAMEWORK: A residual use and lease agreement with a historically low dependence on airline charges and a very low cost structure, resulting in airline cost per enplanement (CPE) at about $2.09 in fiscal 2011 and historically healthy debt service coverage ratios at or above 2.0 times (x).

--CONSERVATIVE DEBT STRUCTURE: The airport's outstanding debt profile consists of entirely fixed rate bonds with a level debt service profile.

--EXTREMELY LOW LEVERAGE AND HIGH CASH BALANCES: The airport's has historically maintained notably strong financial metrics, characterized by extremely healthy liquidity levels and low leverage. Currently, the airport maintains over 2.0x unrestricted liquidity to outstanding long-term debt and a negative Net Debt to Cash Available for Debt Service (CFADS). Leverage levels will likely remain low even when factoring in a proposed borrowing for the regional intermodal transit center (RITC) project to begin in early calendar 2012.

--MANAGEABLE CAPITAL PLAN: Political constraints through 2015 limit the airport's ability to take on additional debt to relocate existing terminal facilities; however, the airport is evaluating issuing additional debt in connection with the RITC in the near term.

WHAT WOULD TRIGGER A RATING ACTION:

--A continuation in the downward trend in debt service coverage ratios regardless of the debt plans for the RITC project;

--Further traffic losses and/or unsuccessful cost controls by the outside operator could impair the authority's historically strong non-airline revenue generation ability, resulting in thinner margins;

--Inability to complete the RITC project on time and within the cost parameters currently contemplated;

--A significant erosion in the airport's high unrestricted cash balances.

SECURITY:

The outstanding bonds are secured by net operating revenues of the airport.

CREDIT SUMMARY:

Fitch maintains the Rating Watch Negative on the authority's general airport revenue bonds to reflect concerns over the airport's plan to issue parity debt obligations in the first half of 2012 in support of its RITC. Although the final project cost and funding sources are not yet finalized, the current estimate of approximately $90 million will place downward pressure on the airport's historically high debt service coverage levels and double the airport's current debt burden. The additional bonds are expected to be on parity with the airport's outstanding bonds and financially supported by a combination of customer facility charge (CFC) revenues and facility rental payments paid by rental car companies. Should the airport move forward with the additional leverage and absent a material change in the project's scope or borrowing elements, an affirmation of the 'AA-' rating is unlikely.

Fitch views the CFCs to be a narrower and volatile revenue stream, which could result in further reliance on general airport revenues or use of the authority's balance sheet. While the increased leverage will narrow coverage and increase the airport's net debt to CFADS, financial metrics will likely remain manageable. However, Fitch believes at the current rating the airport must retain robust financial flexibility in order to mitigate the risks associated with the airport's smaller traffic base and highly competitive market.

For more information on the airport, please see Fitch's press release available on www.fitchresearch.com dated Nov. 23, 2011.

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' (Aug. 16, 2011);

--'Rating Criteria for Airports,' (Nov. 29, 2011).

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=656970

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