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Rating Update:

MOODY'S DOWNGRADES BURLINGTON INTERNATIONAL AIRPORT BOND RATINGS TO Ba1 FROM Baa3; RATINGS PLACED ON NEGATIVE OUTLOOK

13 Oct 2010

BURLINGTON AIRPORT HAS $39.8 MILLION OF RATED DEBT OUTSTANDING

Airport
VT

Opinion

NEW YORK, Oct 13, 2010 -- Moody's Investors Service has downgraded the underlying rating for Burlington (City of) VT Airport Enterprise bonds to Ba1 from Baa3. The outlook on the Ba1 rating is negative. This concludes the review for further downgrade initiated on May 13, 2010.

RATINGS RATIONALE

The downgrade is based on the following factors. The airport's debt service coverage ratios have been lower than its rate covenant of 1.25x since FY2008 based on audited 2008 and 2009 financials. Despite the fact that the airport took actions during this time, the DSCR for 2010 was still below the rate covenant of 1.25x at 1.08x, based on unaudited financials. The declines in the coverages are mainly related to decreased enplanements. During FY2010, the airport had 676,466 enplanements, which is 8.99% less than FY2009 enplanements. Runway rehabilitation which resulted in hard closures of the main runway at late night has temporarily reduced the airport's capacity for flights at certain times, but the airport is expecting to complete this construction in October 2010.

In May, the expected 2010 coverage was 0.86x. Airport increased its parking rates per the consultant's report and managed to decrease its expenses in 2010. These improvements helped coverages to remain above 1 times, however they were not enough to increase the DSCR to its previous levels. The airport is expecting to reach 1.29x DSCR in FY11. At its current debt service coverage levels, (combined with the financial declines that the airport experienced in the two years,) the airport is no longer operating at a level consistent with Baa rated airports.

The City of Burlington is currently rated at A2/Negative. The airport's rating is effected by the City's rating since the airport operates under an open loop structure.

While the airport is actively pursuing ways to improve its liquidity levels, there remains uncertainty regarding the airport's ability to be on a more sustainable path and ultimately reach its previous performance levels. The rating also incorporates the fundamental strength of the Burlington economy, coupled with the lack of direct competition that is likely supportive of future increased rates and charges at the airport.

The last rating action was taken on May 13, 2010 when the underlying rating for Burlington International Airport was downgraded to Baa3 from Baa1. At that time the rating was placed under review for possible downgrade. For more information, please see the detailed rating update report that was published to www.moodys.com on May 13, 2010.

LEGAL SECURITY: Pledge of net revenues of the airport system

DEBT RELATED DERIVATIVE INSTRUMENTS: None

RATED DEBT: Outstanding amounts as of June 30, 2009

Airport Revenue Bonds, Series 1997: $11.5 million: Ba1, Negative

Airport Revenue Bonds, Series 2000: $7.98 million: Ba1, Negative

Airport Revenue Bonds, Series 2003: $23.3 million: Ba1, Negative

KEY INDICATORS:

Type of airport: O&D

Rate making methodology: Hybrid

FY 2009 enplanements ('000): 730,692

FY 2009 vs FY 2008 enplanement Growth: 0.7%

CY 2009 vs CY 2008 enplanement growth: -6.7%

% O&D vs connecting, 2009: 100%

Largest carrier by enplanements, (FY2009share): U.S. Airways (21.7%)

Airline cost per enplaned passenger, 2009: $4.62

Debt per enplaned passenger, 2009: $57.09

Debt service coverage per bond ordinance, FY 2009: 0.99x

Debt service by net revenue, FY 2009: 0.99x

Utilization factor, 2009: 1.18x

Total debt outstanding, FY 2009: $41.7 million

CONTACT:

Brian R. Searles, Director of Aviation - Phone: (802) 863-2874

The bond ratings were assigned by evaluating factors believed to be relevant to the credit profile of the issuer such as i) the business risk and competitive position of the issuer versus others within its industry or sector, ii) the capital structure and financial risk of the issuer, iii) the projected performance of the issuer over the near to intermediate term, iv) the issuer's history of achieving consistent operating performance and meeting budget or financial plan goals, v) the nature of the dedicated revenue stream pledged to the bonds, vi) the debt service coverage provided by such revenue stream, vii) the legal structure that documents the revenue stream and the source of payment, and viii) and the issuer's management and governance structure related to payment.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information, confidential and proprietary Moody's Analytics' information.

Moody's Investors Service considers the quality of information available on the credit satisfactory for the purposes of assigning a credit rating.

Outlook

Outlook

The negative outlook reflects the airport's enplanement declines and the airport's need to restore protective liquidity to the airport and to improve its coverage levels.

What Could Change the Rating - UP

The rating could be pressured upward if the airport improves debt service coverage to around 1.4x on a sustained basis and is able to repair liquidity to a reasonable level.

What Could Change the Rating - DOWN

The rating could be pressured downward if liquidity is not improved in a timely manner, debt service coverage remains below the rate covenant or if enplanement declines continue at the airport. Also, the rating could face negative pressure if leverage increases above the current level and is not supported by enplanements.

MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

Analysts

Esra Akyol
Analyst
Public Finance Group
Moody's Investors Service

Kurt Krummenacker
Backup Analyst
Public Finance Group
Moody's Investors Service

Bart Oosterveld
Senior Credit Officer
Public Finance Group
Moody's Investors Service

Chee Mee Hu
Director
Public Finance Group
Moody's Investors Service

Contacts

Journalists: (212) 553-0376
Research Clients: (212) 553-1653


Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

MOODY'S DOWNGRADES BURLINGTON INTERNATIONAL AIRPORT BOND RATINGS TO Ba1 FROM Baa3; RATINGS PLACED ON NEGATIVE OUTLOOK
No Related Data.
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