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Rating Action:

Moody's assigns A3 to Austin (City of) TX - Airport Rental Car Special Facility Revenue Refunding Bonds, Taxable Series 2021; outlook is stable

29 Jan 2021

New York, January 29, 2021 -- Moody's Investors Service has assigned A3 to Austin (City of) TX - Airport Rental Car Special Facility's approximately $147 million Rental Car Special Facility Revenue Refunding Bonds, Taxable Series 2021. The outlook is stable.

RATINGS RATIONALE

The A3 rating reflects adequate financial coverage and liquidity metrics that will be around historic average levels for consolidated rental car facilities (ConRACs) that Moody's rates A3. The proposed transaction supports the rating by lowering near term debt service requirements to match much lower levels of rental car demand throughout the recovery from the COVID-19 pandemic. Despite delaying maturities, the proposed restructuring achieves net present value savings while also reducing long-term debt service maturities, which is important given the long-term risks to rental cars posed by emerging ground transportation technologies. The rating also positively considers the continued corporate relocations and expansions in the Austin area, which will support demand for rental cars. Moody's expects the facility to maintain liquidity above 2x maximum annual debt service requirements over the next five years in the airport consultant's conservative demand recovery forecast, while producing DSCR above 2x. The rating also considers that the City of Austin plans to add light rail access to the airport to the downtown core over the next decade, however Moody's expects that will pose more of a competitive threat to taxi and transportation network companies (like Uber and Lyft) than to rental cars. Rental cars will still be demanded for the geographically dispersed local service area and tourism to the outer Hill Country region.

The new bonds will have different structural features than existing facility bonds, which will be fully refunded with the proposed transaction. The new trust indenture allows for liquidity in the customer facility charge (CFC) surplus fund to be used for up to 25% of debt service to meet the rate covenant. The ability to use CFC surplus funds has been credit positive to ConRACS to allow for the use of accumulated restricted CFC balances during the pandemic, but the practice could lead to credit weakness over an extended period of time through lower liquidity.

RATING OUTLOOK

The stable outlook reflects Moody's expectation of steadily improving air and business travel throughout the second half of 2021 and through 2022, lower debt service requirements, and adequate liquidity to protect against slower than expected recovery.

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING

- DSCRs, without the benefit of account balances, over 2.0x on a sustained basis

- Continued and sustained growth in CFC collections above fiscal 2019 levels

- CFC balances (including debt service reserve fund) above 4.0x maximum annual debt service

FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING

- DSCRs, without the benefit of account balances, below 1.50x on a sustained basis

- CFC balances (including debt service reserve fund) less than 2x maximum annual debt service

LEGAL SECURITY

The bonds are secured by pledged revenues of the facility, primarily customer facility charge (CFC) revenues net of administrative expenses and transportation O&M costs. The bonds are additionally supported by a cash funded debt service reserve fund. Bondholders also benefit from a rate covenant that requires rates to be set to produce debt service coverage of 1.25x, however 0.25x can come from the rate stabilization fund and up to 0.25x can come from transfers from the CFC surplus fund.

USE OF PROCEEDS

Proceeds will be used to fully refund Series 2013 revenue bonds, fund the debt service reserve account, and pay issuance costs.

PROFILE

Austin-Bergstrom International Airport (ABIA), situated on a former air force base, was constructed in 1999 to replace Robert Mueller Municipal Airport. The airport is currently the second largest medium hub airport in the US. The airport has two parallel north-south runways at 9,000 and 12,250 feet respectively that are capable of handling all commercial service aircraft that are currently in service.

Completed in 2015, the five-level CONRAC facility consists of 4 levels of space for the RACs to use for customer ready/return areas, quick turnaround areas (QTA) to service vehicles, a customer service area, and additional vehicle space and storage. The new building includes expanded terminal area and one ground level public parking, which added approximately 1,058 of parking spaces.

METHODOLOGY

The principal methodology used in this rating was Publicly Managed Airports and Related Issuers published in March 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1140469. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

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.

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 EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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 the rating.

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

Earl Heffintrayer
Lead Analyst
Project Finance
Moody's Investors Service, Inc.
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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.
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JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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