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Rating Action:

Moody's assigns A1 to Greater Orlando Aviation Authority's (FL) Series 2017A Subordinated Revenue Bonds

17 Aug 2017

New York, August 17, 2017 -- Issue: Greater Orlando Aviation Authority Priority Subordinated Airport Facilities Revenue Bonds, Series 2017A (AMT) of the City of Orlando, Florida; Rating: A1; Rating Type: Underlying LT; Sale Amount: $996,585,000; Expected Sale Date: 08/29/2017; Rating Description: Revenue: Government Enterprise;

Summary Rating Rationale

Moody's Investors Service has assigned an A1 to the Greater Orlando Aviation Authority's (FL) (GOAA) Priority Subordinated Airport Facilities Revenue Bonds Series 2017A (AMT), estimated at approximately $997 million. The outlook is stable. The Aa3 rating on the outstanding senior lien obligations reflects the airport's near monopoly position for air travel into a large leisure travel destination that continues to see economic growth and diversification away from the tourism industry. The A1 rating on the subordinate bonds reflects the subordinated nature of payment to existing senior lien obligations and weaker structural protections. Our ratings incorporate the authority's large $3.6 billion capital plan that is expected to ramp up significantly through 2023. While the size of the capital plan is large, financial metrics are expected to remain strong due to the existing revenue generation, low leverage and declining annual debt service requirements on existing debt that allows for a reduced impact on airline costs compared similarly sized projects at other large hub airports.

Rating Outlook

The stable outlook is based on our expectation that the US economy will continue to grow, supporting the tourism industry, and that the authority will successfully implement the capital plan without significant cost increases or delays.

Factors that Could Lead to an Upgrade

Enplanement growth above 2.5% on a sustained basis

Net revenue debt service coverage above 2.5 times after the full amortization of expected debt

Factors that Could Lead to a Downgrade

Capital plan results in substantial increases in debt above currently projected levels in the mid-term

Leverage exceeding $200 debt per O&D passenger

Net revenue debt service coverage below 1.2 times

Sustained enplanement stagnation or declines

Legal Security

Senior lien bonds are secured by the net Revenues of the authority including earnings on funds and investments. Portions of senior lien bonds are also supported by pledged passenger facility charge (PFC) collections. The additional bonds test can be either historical or forward-looking. Net revenues for any consecutive twelve month period of the thirty calendar months preceding the bond issuance must be equal to 1.25 times debt service. For the forward-looking test, projected net revenues must exceed 1.25 times for the three years following expected project completion. GOAA's projections for paying debt service are based on collection of PFCs at the $4.50 level. Debt service reserves are cash-funded at the standard IRS three-prong test.Subordinate lien bonds are secured by a subordinate claim on projected available Net Revenues of the authority and do not have a pledge of PFC collections. The additional bonds test can be either historical or forward-looking. Available Net Revenues for any consecutive twelve month period of the thirty calendar months preceding the bond issuance must be equal to 1.10 times debt service. Additionally, projected net revenues must exceed 1.10 times for the three years following expected project completion. Debt service reserves will be cash-funded at the standard IRS three-prong test.

Use of Proceeds

The Series 2017A bonds will finance a portion of the South Terminal Complex and refinance draws on existing lines of credit.

Obligor Profile

Greater Orlando Aviation Authority is primarily responsible for the operations of Orlando International Airport (MCO), which is owned by the City of Orlando (Orlando (City of) FL, Aa1 stable). MCO is a large-hub origin and destination (O&D) airport in central Florida. The airport is nine miles southeast of downtown Orlando and approximately 20 miles east of the major theme parks in Orange County, FL. The Orlando region is one of the primary tourism destinations in the world, with world class amusement parks and attractions, supplemented by a rapidly diversifying economy with a large healthcare presence and several universities. MCO facilities include four north-south parallel runways with full instrumentation and lighting, capable of triple simultaneous approaches and handling the largest commercial aircrafts currently in use. The North Terminal Complex consists of a central landside terminal and four connected airside buildings (Airsides 1-4). The landside terminal includes ground transportation functions, arrivals and baggage claims, rental cars desks, airlines ticketing and departures counters as well as the majority of food, beverage and retail concessions. Parking adjacent to the landside terminal includes a 8,900-space garage, with additional satellite parking providing 11,400 spots. The landside terminal also includes a 445-room hotel. Airsides 1-4 are connected to the landside terminal by automated people movers, and contain 93 aircraft gates, passenger waiting areas, concessions and airline operations spaces. International arrivals are accommodated between 16 gates within Airside 1 and 4, with two Federal Inspections Service (FIS) facilities. Beyond the 93 aircraft gates, the terminal apron can accommodate an additional 22 aircraft for overnight parking.

Methodology

The principal methodology used in this rating was Publicly Managed Airports and Related Issuers published in November 2015. 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.

Myra Shankin
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

Michael Mulvaney
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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