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Rating Action:

Moody's assigns A1 rating to the Broward County, FL Airport's Revenue Bonds Series 2017; Outlook is stable

20 Oct 2017

NOTE: On October 23, 2017, the press release was corrected as follows: In the methodology paragraph, the publication date for the principal methodology was changed to October 2017. Revised release follows.

New York, October 20, 2017 -- Issue: Airport System Revenue Bonds, Series 2017 (AMT); Rating: A1; Rating Type: Underlying LT; Sale Amount: $325,435,000; Expected Sale Date: 10/25/2017; Rating Description: Revenue: Government Enterprise;

Summary Rating Rationale

Moody's Investors Service has assigned a A1 rating to Broward (County of) FL Airport Enterprise's $325 million Airport System Revenue Bonds, Series 2017 (AMT). Concurrently, Moody's has affirmed the A1 rating on the enterprise's outstanding parity debt. The outlook is stable.

The A1 rating reflects the airport's strong growth trend; favorable airline diversity; position as the leading domestic O&D airport in a competitive air trade market; the strong demographic and economic prospects of the air trade market; and low cost per enplanement and leverage metrics, which will support the airport's credit profile as it continues to implement a large, demand-driven capital program.

Enplanement growth continues on a strong trajectory, having already increased at a compound annual rate of 3.3% for the period 2000-2014, more than double the rate of growth at competing airports in the catchment area. The completion of the South Runway Expansion in late 2014 significantly increased airfield capacity, and has been followed by accelerating growth. Enplanements have increased 31% over the last three years, averaging 9.5% annual growth, levels well in excess of large hub airports and peers in Florida.

The strong enplanement growth has driven similarly strong growth in non-airline revenues, stabilizing both airline CPE and debt per O&D enplanement. The airport's FY 2016 CPE of $3.94, which was the fourth lowest among Moody's rated large hubs, will rise toward a still manageable $10.50 by 2021, during which time debt per O&D enplanement will also rise toward $150. While elevated from historical levels, the airport's CPE and leverage will remain manageable relative to peers, many of which are undertaking large capital programs that will lead to similar increases in CPE and leverage. The airport's credit profile will be further supported by the full residual airline agreement that extends beyond implementation of the capital program and rate basing of the related debt service, through 2026.

Rating Outlook

The stable outlook reflects our expectation that the credit profile will remain stable over the next 12-18 months, supported by new air service and increased seat capacity in FY 2018, ongoing economic expansion in the service area, and manageable expected increases in costs to airlines. We expect the airport will continue to deliver major capital projects on-time and within budget.

Factors that Could Lead to an Upgrade

- The rating could be upgraded if the airport completes the capital program within the current cost estimate and strong enplanement growth enables the airport to lower CPE relative to both the current baseline and competitors, supporting its ability to sustain or increase its leading domestic O&D market position in South Florida.

Factors that Could Lead to a Downgrade

- The rating could be downgraded if the airport increases debt per O&D above $200, the airport's low-cost position is diminished as a result of higher than expected CPE or an adverse change in air service, or the airport's market position weakens relative to historical levels while leverage remains elevated relative to historical levels.

Legal Security

Net revenues of the airport enterprise for all series and available PFC revenues and available grants (from Florida Department of Transportation and the FAA) secure outstanding and currently issued bonds.

The rate covenant requires that net revenues, including transfers from the General Purposes Account, be 125% of annual debt service (excluding debt service payable from any irrevocably committed PFCs) and 100% of reserve requirements. There is also a sum-sufficient test which includes subordinated debt service. The additional bonds test requires that net revenues (including transfers) from the previous fiscal year meet the rate covenant requirement for each of the next five fiscal years, or projected net revenues and transfers meet the 125% rate covenant requirement including the new bonds to be issued.

Debt Service Reserve Fund (DSRF): The DSRF requirement is the lesser of maximum aggregate annual debt service, 125% of average annual debt service, or 10% of the originally issued principal. The majority of the airport's debt service reserve requirement is cash funded ($134.4 million as of September 30, 2017), however an Ambac surety amounting to $14.9 million will remain outstanding for the Series 2001 J-2 bonds through 2021. The debt service reserve requirement is $139.1 million and including the surety, it is currently $10.2 million over-funded.

Use of Proceeds

The Series 2017 bonds will provide new money for the airport to finance various capital improvement projects, majority of which are focused on terminal facilities. The proceeds will also be used as capitalized interest and deposited into the Debt Service Reserve Account.

Obligor Profile

Broward County Aviation Department operates as an enterprise fund of the county. It is self-supporting and does not rely on local tax dollars to fund its operations. Operating revenues are generated from aviation users, automobile parking, concessions, investment income, and other non-operating revenues in order to cover the airport system's operating expenses, debt service payments, certain capital outlays and other requirements.

FLL is a large hub O&D airport. The airport has two parallel runways of 9,000 feet and 8,000 feet in length, both capable of accommodating the majority of commercial aircraft in service. The airport has four terminals - Terminals 1, 2, 3 and 4 - with 8 concourses currently, but will have 7 concourses with 66 gates upon completion of the capital plan. The airport has 11,472 on-airport parking spaces in three garages, not including spaces in a rental car center, located in the Cypress Garage, served by 12 rental car companies. An additional 4,010 public parking spaces are provided in a remote lot. The airport has scheduled passenger service provided by 25 carriers - 11 domestic and 14 foreign flag carriers. Three all-cargo carriers provide scheduled service, but air cargo activity at FLL is minimal relative to the air cargo activity at nearby MIA.

HWO is a general aviation reliever airport for FLL.

Methodology

The principal methodology used in this rating was Publicly Managed Airports and Related Issuers published in October 2017. Please see the Rating 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.

Moses Kopmar
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Kurt Krummenacker
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JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
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JOURNALISTS: 1 212 553 0376
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