Madrid, January 27, 2021 -- Moody's Investors Service ("Moody's") has today
affirmed the A1 long-term issuer rating of Flughafen Berlin Brandenburg
GmbH (FBB). Concurrently, Moody´s upgraded the company´s
standalone Baseline Credit Assessment (BCA) to b2 from b3. The
rating outlook remains stable.
RATINGS RATIONALE
Today´s rating action reflects the ongoing support from FBB´s
three shareholders, the Land of Berlin (Aa1 stable), the Land
of Brandenburg (Aaa stable) and the Government of Germany (Aaa stable),
who continue to provide timely financial assistance in the context of
a persistently difficult operating environment driven by the severity
of the coronavirus outbreak. More specifically, the rating
affirmation considers the decision of the shareholders, in December
2020, to provide additional contributions, in the form of
up to EUR552 million of shareholder loans, to cover the company´s
operating and financial needs through to at least the end of 2021.
The upgrade of the BCA to b2 reflects the commissioning of Terminal 1
of the new Berlin Brandenburg (BER) airport and the implementation of
the new tariff structure that the company had previously agreed with the
regulatory authorities and the airline community, which resulted
in tariff increases starting from November 2020. In particular,
the opening of the new airport facility on 31 October 2020 concluded a
lengthy construction phase that contributed to a substantial increase
in the company´s leverage. This, coupled with an increase
in the aviation charge per passenger of around 50%, has the
potential to improve FBB´s future cash generation and gradually
reduce its level of indebtedness. However, passenger volumes
will remain weak as a result of the coronavirus pandemic and the company´s
standalone credit profile continues to reflect the extremely high financial
leverage of FBB with the funds from operations (FFO)/Debt ratio expected
to remain below 2% at least until 2024.
More generally, FBB's A1 issuer rating positively reflects (1) the
expectation that its three shareholders will continue to step in with
timely financial support where necessary, given its critical role
as the sole provider of air transport infrastructure to the region of
Berlin and its ongoing large construction project and (2) that more than
90% of its indebtedness will continue to be covered by guarantees
from its shareholders or directly provided by its shareholders.
The rating of FBB is, however, constrained by FBB's very high
indebtedness and weak financial profile on a standalone basis.
The rating expresses a view on the credit risk of FBB excluding any specific
contractual credit support provided to the funders of FBB, e.g.
direct guarantees of the shareholders.
FBB is a government-related issuer and its rating reflects Moody's
view on the company's standalone credit quality, expressed as a
BCA of b2, together with potential uplift based on an assumption
of support from its shareholders if this were ever required, which
Moody's assesses as very high. Under the Government-Related
Issuers Methodology, Moody's assesses dependence as moderate.
On a standalone basis, FBB's BCA of b2 reflects (1) FBB's very high
indebtedness and weak liquidity position, a legacy of the lengthy
construction period of the new BER airport; (2) FBB's monopolistic
position and strategic role as the owner and operator of the only airport
serving the conurbation of Berlin; (3) a very high proportion of
origin and destination traffic which historically contributed to a resilient
traffic profile; and (4) a reasonably predictable regulatory environment.
The coronavirus pandemic, the weakened global economic outlook,
low oil prices and asset price declines are sustaining a severe and extensive
credit shock across many sectors, regions and markets. The
combined credit effects of these developments are unprecedented.
The airport sector is one of the sectors most significantly affected by
the shock given its exposure to travel restrictions and sensitivity to
consumer demand and sentiment.
FBB´s traffic has been severely impacted by the pandemic and the
introduction of travel restrictions. In particular, in the
full-year 2020, passenger traffic was 74% below 2019
levels, equally affecting domestic traffic (-75% year-on-year)
and international traffic (-74% year-on-year).
Given the recent surge in the number of COVID cases, the return
of more stringent travel restrictions, and the limited flight activity,
the path to recovery in passenger traffic remains very uncertain.
On the basis of Moody´s view that widespread global availability
of the vaccines will start to materially benefit passenger traffic only
from 2022, the rating agency expects that FBB´s passenger
traffic will remain at least 40% below 2019 levels in 2021.
RATIONALE FOR STABLE OUTLOOK
Despite the continued downside risks linked to the consequences of the
coronavirus outbreak and the significant uncertainties around traffic
recovery, the stable outlook of FBB is in line with that of the
Government of Germany, the Land of Brandenburg and the Land of Berlin.
This reflects the fact that the company's rating is influenced overwhelmingly
by that of its three shareholders given the substantial tangible financial
support FBB has received in the past in the form of shareholder loans,
equity injections, and the provision of debt guarantees, and
the expectation that this will continue over the short to medium term
where necessary.
The evolution of FBB's BCA will depend on traffic recovery as the
COVID-19 pandemic wanes, but equally importantly, the
decisions that shareholders may take in terms of the longer term capital
structure of FBB. The b2 BCA reflects the view that even after
a recovery from the pandemic, in 2024, FBB will likely have
a level of indebtedness under the current capital structure that will
not enable it to operate financially on a fully standalone basis.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
Upward pressure on FBB's rating could occur if it becomes evident
that FBB will continue to operate with a very high level of tangible shareholder
financial support into the longer term. Upward rating pressure
on the BCA could materialize if (1) traffic recovery looked more certain;
(2) the company would be able to significantly improve its standalone
financial profile, for instance through an increase of its funds
from operations (FFO)/Debt ratio significantly above current levels;
and (3) the company´s liquidity position becomes less dependent
on shareholders support.
FBB's rating could come under downward pressure if the rating of any of
its three shareholders were to be downgraded or if there was a material
change in the level of support provided by the shareholders (for example
if the proportion of debt covered by guarantees were to diminish or if
the expected cash injections from the shareholders failed to materialise).
PRINCIPAL METHODOLOGIES
The methodologies used in this rating were Privately Managed Airports
and Related Issuers published in September 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1092224,
and Government-Related Issuers Methodology published in February
2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186207.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
CORPORATE PROFILE
Flughafen Berlin Brandenburg GmbH is the company owning and operating
the new Berlin Brandenburg Airport Willy Brandt (BER) airport.
Following the closure of Tegel airport and the conversion of Schoenefeld
airport into BER´s Terminal 5 in early November 2020, BER
airport is the only airport serving the city of Berlin and its conurbation.
In 2020, the company handled just over 9 million passengers.
FBB is 37% owned by the Land of Brandenburg (Aaa, Stable),
37% owned by the Land of Berlin (Aa1, Stable) and 26%
owned by the Government of Germany (Aaa, Stable).
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
This rating is solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
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Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Corrado Trippa
Analyst
Infrastructure Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Andrew Blease
Associate Managing Director
Infrastructure Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
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JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
