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Rating Action:

Moody's assigns Aa2 to Massachusetts Port Authority's Revenue Bonds, Series 2021-D (Non-AMT), and Series 2021-E (AMT); outlook is stable

02 Mar 2021

New York, March 02, 2021 -- Moody's Investors Service ("Moody's") has assigned Aa2 to the Massachusetts Port Authority's (Massport's) $62.9 million Revenue Bonds, Series 2021-D (Non-AMT) and $359.0 million Revenue Bonds, Series 2021-E (AMT). The rating outlook is stable.

RATINGS RATIONALE

The Aa2 rating is based on the strong fundamentals of the authority, with Boston Logan International Airport (BOS) among the strongest of Moody's rated airports. The enplanement base remains among the most diversified in the US airport sector, with JetBlue holding the largest market share at 29.6% for the four months ended October 31, 2020. The airport is also supported by Boston's strong and diversified economy anchored in high technology, biotechnology, healthcare and higher education. This combination of high origin and destination demand from a strong non-leisure based economy and diversity of carrier mix is one of the key credit strengths of the authority and we expect the demand for air service out of BOS to recover.

Prior to the coronavirus outbreak, BOS saw above average passenger growth, with annual enplanements up 7.5%, 5.4% and 6.1% at FY 2017, 2018 and 2019 respectively. FY 2020 was impacted by the pandemic only in its last quarter but was down 27.5% for the year to 15.1 million enplanements. The four months ended October 31, 2020 saw enplanements down 81.5% from the same period the prior year, which is in line with losses seen by other international hubs in the US. The airport is projecting the return of pre-pandemic passenger levels in approximately five years.

Massport entered the pandemic in a strong financial position, with FY 2019 debt service coverage at 3.57x on a Moody's net revenue basis. Through the last quarter of FY 2020, the authority took several actions to bolster its finances, including a $40 million reduction in operating expenses, suspension or deferral of $850 million of capital projects and a taxable direct purchase transaction which provided additional financial flexibility. These actions resulted in debt service coverage decreased only slightly to a still robust 3.19x, or 3.67x with the benefit of $57.1 million of CARES ACT funds and strong liquidity levels at approximately 700 days cash on hand.

Given that FY 2020 had only a single quarter of impact from coronavirus, there is an expectation for material passenger declines for FY 2021 ended June 30, 2021 and operating revenues are projected to decline nearly 30% in comparison to FY 2019. We expect Massport to take further action to reduce expenses and restructure its debt profile if necessary. We also expect the pre-pandemic capital program to be further reduced or postponed while passenger levels remain depressed. Debt service coverage, CPE and leverage levels are anticipated to remain under pressure for the next three to five years, after which time we see a recovery to historical ranges.

The rapid and widening spread of the coronavirus outbreak and deteriorating global economic outlook are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.

RATING OUTLOOK

The stable outlook is predicated on our view that enplanements will recover at a rate similar to other US international hubs, with coverage, leverage and costs per enplanement returning to pre-pandemic levels.

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS

- Sustained enplanement growth, including the recovery and growth of international enplanements

- Maintenance of financial liquidity well above 600 days cash on hand

- Completion of capital plan with better than currently forecasted financial metrics, including DSCRs and CPE

FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS

- Indications that Logan Airport's market position has experienced a negative fundamental shift due to coronavirus

- Sustained DSCRs below 2.0x on a Moody's net revenue calculated basis

- Increases in airline CPE significantly above those in current forecast

- Financial liquidity that falls below 250 days cash on hand

- Increasing political pressure to support transportation initiatives that do not enhance Massport revenues

LEGAL SECURITY

The 2021 bonds are being issued under the 1978 Master Trust Agreement and are secured by a pledge of net revenues of the authority. Starting in FY 2020, the authority has been authorized to approve resolutions that designate specific PFC revenues as available funds, and to the extent approved by the FAA, such amounts would then be used to pay debt service on specific Series of Bonds. The 2021 bonds benefit from a debt service reserve equal to maximum annual debt service within a pooled reserve which secures all of outstanding revenue bonds except Series 2020A and 2020B.

USE OF PROCEEDS

The 2021 bonds will be issued to (i) fund capital improvements, (ii) fund capitalized interest, (iii) to finance the debt service reserve requirements and (iv) to finance the costs of issuance.

PROFILE

Massachusetts Port Authority (Massport) owns, operates and manages Boston Logan International Airport (BOS), Laurence G. Hanscom Field (BED), Worcester Regional Airport (ORH), and certain facilities in the Port of Boston, including Moran Terminal, Hoosac Pier (site of Constitution Center and Marina), Mystic Piers 1, 48, 49 and 50 and the Medford Street Terminal, all of which are located in Charlestown; Conley Terminal, the North Jetty and Fargo Street Terminals, the former Army Base (including Flynn Cruiseport Boston), the Boston Fish Pier, Commonwealth Pier (site of World Trade Center Boston) and a portion of Commonwealth Flats, all of which are located in South Boston; and the East Boston Piers and the Boston Marine Works, both located in East Boston. Logan Airport is the principal source of the authority's revenues, operating expenses and is the dominant factor in the determination of the authority's financial condition.

METHODOLOGY

The principal methodology used in these ratings 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 ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are 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.

Myra Shankin
Lead Analyst
Project Finance
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Kurt Krummenacker
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Client Service: 1 212 553 1653

No Related Data.
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