Moodys.com
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
New Issue:

MOODY'S REVISES THE OUTLOOK ON INDIANAPOLIS AIRPORT'S REVENUE BONDS TO NEGATIVE FROM STABLE; ASSIGNS A1 TO SERIES 2010K BONDS

29 Nov 2010

AIRPORT HAS $1.25 BILLION RATED DEBT OUTSTANDING

Indianapolis Airport Authority, IN
Airport
IN

Moody's Rating

ISSUE

RATING

Airport Revenue Bonds, Series 2010K

A1

  Sale Amount

$150,000,000

  Expected Sale Date

12/14/10

  Rating Description

Revenue Bonds

 

 
Moody's Outlook   Negative
 

Opinion

NEW YORK, Nov 29, 2010 -- Moody's Investors Service has revised the outlook on the Indianapolis Airport Authority's revenue bonds to negative from stable. We have also assigned an A1 rating to the $150.0 million Indianapolis Local Public Improvement Bond Bank (Indianapolis Airport Authority [IAA] as obligor), Series 2010 K and affirmed the A1 rating on the airport's outstanding parity debt of $1.25 billion. The authority is also issuing the Series 2010 L Airport Revenue Refunding Bonds in the amount of $350 million at this time, but these bonds will not carry a long-term rating from Moody's.

RATINGS RATIONALE

The negative outlook is based on Moody's concerns that national and local economic conditions will continue to weigh on enplanement growth as the authority faces high fixed costs from its large debt load. The rating and outlook also reflect the authority's below average performance in enplanement growth during FY 2009 and FY 2010 and below average debt service coverage ratios that are projected to remain narrow. The rating is supported by the airport's strong market position, the diversity of revenues provided by the large cargo operations by Federal Express (senior unsecured rated Baa2/stable outlook), and the diversity of air carrier service at the airport.

The fixed rate Series 2010K bonds will be used to purchase any Series 2004, 2005 or 2006 bonds that are tendered during the open market purchase request period. The authority expects this to amount to approximate $150 million, but the total could vary from $0 to the entire $750 million. The Series 2010L bonds will be indexed floating rate bonds privately placed with a syndicate of banks led by Wells Fargo Bank, N.A. (long term issuer rating Aa2) in an amount that refunds the $350 million Series 2008A. The Series 2010L bonds will have a mandatory tender date that the authority expects to be set three years from the date of issuance. At this date the authority may cause the bonds to be remarketed. Any unremarketed bonds remaining with the bank after the mandatory tender date will bear interest at a penalty rate and amortize quarterly over a three year period. During the initial term, these bonds will bear interest at a rate that matches the indexed rate the airport receives on its outstanding floating-to-fixed rate swaps of 75% of 1-month LIBOR, plus an additional 85 basis points. The 85 basis points assumes the bonds have a mandatory tender date three years from the date of issuance.

USE OF PROCEEDS: The Series 2010K bonds will refund any amounts from the Series 2004, Series 2005, or Series 2006 bonds that are tendered in the open market purchase request. The Series 2010L bonds will refund the entire $350 million Series 2008A variable rate issue.

LEGAL SECURITY: The bonds are secured by the authority's pledge of net revenues - gross revenues less operating and maintenance expenses. The additional bonds test is set at 1.25 times maximum annual debt service ("MADS") and the debt service reserve fund is sized at the lesser of 10% of par, 125% average annual debt service or MADS, and will be cash-funded from bond proceeds. The Series 2010L bonds will not have a reserve fund available to bondholders at this time. The debt service reserve funds associated with the refunded Series 2008A bonds are being released to fund a portion of the capital improvement program and the authority will use a similar amount to defease approximately $36 million of the Series 2003A bonds.

INTEREST RATE DERIVATIVES: The authority is a party to six interest rate swap transactions with a total notional amount of $350 million. Four of the swaps are floating-to-fixed rate swaps, exchanging 75% of 1-month LIBOR for fixed rates of interest on a notional amount of $350 million. One swap is a constant maturity swap, exchanging 75% of 1-month LIBOR for 75% of 10-year LIBOR less 43.7 basis points on a notional amount of $100 million. This constant maturity swap is effectively unwound by a reverse constant maturity swap for the same notional amount with the same counterparty, UBS AG (Aa3/negative outlook), through July 1, 2012 at which time the reverse swap terminates. Moody's notes that the constant maturity swap could result in significantly higher than anticipated interest costs should the yield curve experience a prolonged period of inversion. Collateral posting is required only of the counterparties and the counterparties may terminate the swaps only if the authority's unenhanced rating falls below Baa1 (or comparable ratings by other rating firms). Net payments benefit from a parity claim on net revenues pledged for bond debt service, while termination payments are secured solely by amounts on reserve in other authority funds. The current combined market value of all six swaps as of October 31, 2010 was $65.2 million in favor of the counterparties.

STRENGTHS:

* Strong residual agreements with the signatory airlines effective through 2015 provide revenue, liquidity, and coverage protection from large enplanement declines

* Diverse air carrier set serves a growing origination & destination (O&D) market with no carrier accounting for more than 25%

* The airport serves a large, stable market area with limited competition from other airports

* Large cargo operations with the second-largest FedEx (long term rating Baa2/stable outlook) sorting facility in the world

* Strong financial operations and solid cash position for a residual airport, with 349 days cash on hand.

CHALLENGES:

* Heavy debt leverage following a series of large borrowings to complete the new airport project will continue to weigh on airport finances

*Enplanements have decreased -8.5% in 2009 and increased only 0.4% in FY 2010 year-to-date, both of which are below national averages

*National and local economic conditions are expected to continue to weigh on enplanement growth in the near term

MARKET POSITION/COMPETITIVE STRATEGY: STRONG O&D MARKET PROVIDES SOME ENPLANEMENT STABILITY

The airport experienced an enplanement decline of 8.5% in 2009 and year-to-date 2010 enplanements are roughly flat compared to the same period in 2009. These changes are both underperforming compared to levels typically seen across the U.S. over the same period. The airport has a strong market position with only limited competition for commercial air service in a two-hour driving radius. The service area economy is also stabilized by the presence of the state capital and a number of major higher education universities, which will help to offset job losses at Eli Lilly's global headquarters. Moody's expects the service area economy to recover on par with the national economy and, thus, enplanement growth will likely remain similar to national averages.

The combination of Northwest and Delta Airlines has not affected the combined carriers' market share at the airport, which was just under 26.4% in 2009 and 25% through September 2010. Enplanements remain diversified due to the market share gains for both Southwest (rated Baa3/stable outlook) and AirTran (rated Caa1/ratings under review for possible upgrade), along with the presence of the Federal Express hub, which accounted for approximately 12% of operating revenues at the airport in 2009.

FINANCIAL POSITION AND PERFORMANCE: FINANCIAL POSITION REMAINS SOLID DESPITE CHALLENGES

Enplanement declines have come at a difficult time as the airport is facing increasing debt service requirements since the completion of the new airport in November 2008. As a result of enplanement declines, cost per enplanement for 2009 was $10.89, which is higher than the budgeted figure of $9.85. The authority projects costs to fall below $10.00 in 2011 and beyond. Moody's notes that these projections are based on reasonable enplanement growth assumptions of a 1.5% CAGR. Although the forecasted figures are above the Moody's U.S. Airport median of $6.62 (FY 2008), it is a manageable number given the newness of the facilities and the airport's strong market position.

Debt service coverage narrowed in 2009 compared with prior years, but is projected to stabilize over the coming years. Debt service coverage, as calculated by bond ordinance accounting, measured 1.52 times in 2009 and is expected to remain between 1.50 times and 1.65 times. Based on net revenues alone, Moody's expects coverage to average approximately 1.11 times through 2015. These projections reflect the enplanement declines in 2009 and median growth from the new enplanement base level.

The refunding of the Series 2008A bonds through this transaction removes a key concern for the rating by eliminating the Standby Bond Purchase Agreements that supported the Series 2008 bonds. The agreement contained rating triggers for termination of the agreements related solely to that of the bond insurer (Assured Guaranty rated Aa3/negative outlook) without consideration of the rating of the authority. These triggers placed a risk on the airport that it would have struggled to adequately offset at its current level of financial liquidity.

The large amounts of debt needed for the new airport project has put the authority's leverage metrics well above Moody's U.S. airport medians. The airline debt per enplaned passenger of $297 in 2009 is among the very highest of the 92 airports for which Moody's maintains an underlying rating. While the strength of the airport's market position makes this risk a manageable one, it increases the volatility of debt service coverage during periods of decline

Outlook

The negative outlook is based on Moody's concerns that national and local economic conditions will weigh on enplanement growth as the authority faces high fixed costs from its large debt load.

What Could Change the Rating - UP

Growth in enplaned passengers or a reduction in debt service requirements that significantly reduces cost per enplaned passenger while maintaining strong internal liquidity could have a positive effect on the rating. Strong improvements in the national or local economy that provides additional passenger growth could also have a positive effect on the rating.

What Could Change the Rating - DOWN

Downward pressure on the rating could arise if enplanements fall below projections, other events cause the cost per enplanement to rise above $12.00, or if debt service coverage declines significantly.

Key Statistics

Type of Airport : O&D

Rate-Making Methodology : Residual

FY 2009 Enplanements : 3,740,873

5-Year Enplanement CAGR (2005-2009) : -2.6%

FY 2009 vs. FY 2005 Enplanement Growth : -12.17%

FY 2009 vs. FY 2008 Enplanement Growth : -8.5%

% O&D vs. Connecting, FY 2009 : 94.2%

Largest Carrier by Enplanements, FY 2009 (Share) : Delta (25.0%)

Airline Cost per Enplaned Passenger, FY 2009: $10.89

Debt per Enplaned Passenger, FY 2009 (5 YR AVG) : $297.35 ($218.11)

Days Cash on Hand, FY 2010 (Estimate) : 349 Days

Bond Ordinance Debt Service Coverage, FY 2009 (5 YR AVG) : 1.52x (2.65x)

Utilization Factor, FY 2009: 1.99

Debt Outstanding

Series 2010A Airport Revenue Bonds, $25.760 million; A1

Series 2008A Airport Revenue Bonds, $350.0 million; A1

Series 2006B Airport Revenue Bonds, $31.180 million; A1

Series 2006A Airport Revenue Bonds, $345.205 million; A1

Series 2005A Airport Revenue Bonds, $197.385 million; A1

Series 2004A Airport Revenue Bonds, $205.540 million; A1

Series 2003A Airport Revenue Bonds, $96.835 million; A1

ISSUER CONTACTS

Jeremiah Wise, Treasurer, (317) 487-5258

Marsha Stone, Chief Financial Officer, (317) 487-5081

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 information, and 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.

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

Kurt Krummenacker
Analyst
Public Finance Group
Moody's Investors Service

John Medina
Backup Analyst
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 REVISES THE OUTLOOK ON INDIANAPOLIS AIRPORT'S REVENUE BONDS TO NEGATIVE FROM STABLE; ASSIGNS A1 TO SERIES 2010K BONDS
No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR  PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. 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 or in preparing its Publications.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​​​​​
Moodys.com