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Rating Action:

Moody's affirms Baa1 on Niagara Frontier Transportation Authority (NY); outlook is stable

Global Credit Research - 13 Sep 2016

New York, September 13, 2016 -- Summary Rating Rationale

Moody's Investors Services affirms the Baa1 rating on the Niagara Frontier Transportation Authority, NY, $74.8 million Airport Revenue Bonds, Series 2014A and 2014B. The outlook is stable.The bonds are secured by a senior lien pledge of Buffalo Niagara International Airport (BUF)'s net revenues. The Baa1 rating reflects BUF's position as a primary provider of air service in a sizeable service area that includes portions of Canada. Despite BUF's dominant position and competitive costs, we expect air travel demand will continue to be influenced by unfavorable demographic trends in the Buffalo area economy and the recent, significant appreciation of the US dollar versus the Canadian dollar, which hampers demand from Canadian passengers.The rating also considers BUF's stable financial position, evidenced by adequate debt service coverage ratios (DSCRs), increased certainty and restrictions on the ability of the authority to divert revenues for non-airport uses, and a capital program that is likely to require only a limited amount of additional debt. Stability is also provided by an airline agreement that extends through March 31, 2019.The rating is pressured by annual transfers to Niagara Falls International Airport and the NFTA's Metro transit system, which limit BUF's ability to build available cash or to lower airline rates and charges. Additionally, BUF faces a potential collateral call if the rating of Assured Guaranty falls below a certain level.

Rating Outlook

The stable outlook reflects our belief that the airport will continue to maintain satisfactory financial metrics, enplanements will stabilize near current levels, and that the airport's debt levels will improve based on no plans to issue additional debt.

Factors that Could Lead to an Upgrade

Increase in the demand for air travel manifested by sustained enplanement growth

Increased ability to retain airport cash flow through a reduction in operating transfers

Days cash on hand above 600 days

Factors that Could Lead to a Downgrade

Sustained loss or high volatility of enplanements levels

Reduced liquidity levels

A transfer of funds from the airport development fund (ADF) in excess of the FAA safe harbor amount

Sustained increase in airline cost per enplanement (CPE)

Legal Security

The bonds are secured by a senior lien pledge of BUF's net revenues. The airport system is currently defined as only BUF. Bondholders are protected by an additional bonds test that requires 1.25 times coverage. The rate covenant requires sum sufficient coverage utilizing an unlimited amount of transfers from the airport development fund, which is the bottom bucket of airport revenues. A series specific debt service reserve fund is cash funded and is sized according to the standard three prong test.

Use of Proceeds

Not applicable.

Obligor Profile

BUF is located approximately 10 miles east of Buffalo's business district in Cheektowaga. The airport consists of two air carrier runways, a 462,000 square foot terminal building with 26 gates, and 8,262 parking spaces.

Methodology

The principal methodology used in this rating was Publicly Managed Airports and Related Issuers published in November 2015. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

Regulatory Disclosures

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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 the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Daniel Lima
Lead Analyst
Project Finance
Moody's Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
BR
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Kurt Krummenacker
Additional Contact
Project Finance
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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