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Rating Action:

Moody's assigns A1 to Broward County, FL Airport Enterprise's $757 million Airport System Revenue Bonds, Series 2019ABC; stable outlook

15 Oct 2019

Affirms A1 rating on $2.1 billion of parity revenue bonds

New York, October 15, 2019 -- Moody's Investors Service has assigned ratings of A1 to Broward County (Florida) Airport Enterprise's $449 million Airport System Revenue Bonds, Series 2019A (AMT); $64 million Airport System Revenue Refunding Bonds, Series 2019B (AMT); and $244 million Airport System Revenue Refunding Bonds, Taxable Series 2019C. Moody's has affirmed the A1 ratings on $2.1 billion of parity revenue bonds. The outlook is stable.

RATINGS RATIONALE

The A1 rating reflects the system's exceptionally strong growth; favorable air service profile and high significance in the networks of its three main passenger carriers; position as the low fare and primary domestic O&D airport in South Florida, a strong air trade market with supportive demographics and economic prospects; and relatively low airline cost per enplanement (CPE) and leverage metrics, which support the system's ability to continue implementation of a large, demand-driven capital program.

The system's credit profile has benefited from robust passenger traffic and corresponding market share growth over the last five years (2014-2018), wherein system enplanements grew 47% (by 5.6 million enplanements) compared to aggregate growth of 10% (or 2.4 million enplanements) at competing South Florida airports and 20% at all US airports in the same period. The growth, which remains balanced among the airport's three primary carriers and reflects a combination of expanded domestic and international service and growing connecting traffic, has been enabled by airfield and terminal expansion projects implemented in the system's $3.2 billion FLLAir Plan.

The enplanement growth has expanded the enplanement base and driven strong performance in non-airline revenues, both of which have tempered the upward pressure on CPE and debt per enplanement from the addition of debt for the expansion plan. CPE and debt per enplanement will rise further over the next five years as (1) new financing costs enter the airline rate-base and (2) the system continues to implement expansion-oriented capital projects that are needed to relieve capacity constraints and enable future growth. The system's credit profile reflects the benefit of having initiated these capital investments from a position of very low CPE ($4.52 in 2014, $7.72 in 2018) and leverage relative to both regional competitors and national large hubs. While rising from historical levels, the airport's CPE and leverage will remain favorable compared to relevant peers, the majority of which are undertaking equally large - and in many cases larger - capital programs that will lead to similar or greater increases in CPE and leverage.

The airport's credit profile is supported by strong visibility into cost recovery resulting from airline approval of the capital projects that will be implemented and charged pursuant to the system's full residual airline agreement in effect through 2026, which is two years beyond the scope (2020-2024) of the current capital program. However, the rating reflects our expectation that, within or following completion of the current CIP, the system will incur additional debt to fund terminal expansion and landside projects with the potential to be sizeable in terms of cost and scope, which will limit the ability to moderate or reduce CPE and leverage.

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 fiscal 2020, 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

- Increased clarity regarding cost estimates, timing and procurement strategies for major capital projects - terminal expansion, automated people mover and intermodal center - in the master plan.

- Continued demonstration of strong traffic performance with average or below-average enplanement volatility through economic cycles.

- CPE and leverage diverge more favorably than anticipated relative to peers, supporting the system's ability to sustain its competitive cost structure and leading domestic O&D market position in South Florida.

FACTORS THAT COULD LEAD TO A DOWNGRADE

- The system's low-cost advantage and market position are meaningfully weakened as a result of higher than expected CPE or adverse changes in air service at FLL or competitors such as Miami International Airport or relevant large hubs.

- CPE and debt per O&D enplanement rise more than anticipated and reach levels that erode the airport's current favorable position relative to large hubs, combined with a sustained period of declining traffic and market share loss.

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.

The bonds are additionally secured by a common debt service reserve account sized at the standard three-prong test.

USE OF PROCEEDS

The Series 2019A bonds will provide new money for the airport to finance various capital improvement projects, the majority of which are focused on terminal facilities. The 2019B bonds and 2019C bonds will refund, on a current and advance basis, existing debt for savings.

PROFILE

Broward County Airport Enterprise 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 these ratings was Publicly Managed Airports and Related Issuers published in March 2019. 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, 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.

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
Lead Analyst
Project Finance
Moody's Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
US
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Kurt Krummenacker
Additional Contact
Project Finance
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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