New York, June 22, 2016 -- Issue: Revenue Bonds, Series 2016-B (AMT); Rating: Aa2; Rating Type: Underlying LT; Sale Amount: $190,750,000; Expected Sale Date: 07/11/2016; Rating Description: Revenue: Government Enterprise;
Issue: Revenue Refunding Bonds, Series 2016-A (Non-AMT); Rating: Aa2; Rating Type: Underlying LT; Sale Amount: $52,500,000; Expected Sale Date: 07/11/2016; Rating Description: Revenue: Government Enterprise;
Summary Rating Rationale
Moody's Investors Service assigns Aa2 to Massachusetts Port Authority's (Massport) Series 2016A revenue refunding and 2016B revenue bonds and affirms the Aa2 on outstanding parity debt. The rating outlook is stable.
The Aa2 is based on the credit fundamentals of the authority, which are currently among the strongest of Moody's rated airports. The airport has a strong and improving relative market position in a robust and diverse economy and is expected to maintain above-average financial metrics for the foreseeable future despite substantial additional planned debt to fund its 2016-2020 capital program. Massport's enplanement base remains among the most diversified in the US airport sector and the airport has had above average growth in recent years, which is continuing into 2016. The high rating is tempered by expectations of an additional $1 billion in debt through 2020, our expectation that liquidity will decline to levels below the sector average and further concerns that Massport's revenues may be diverted to non-core transportation projects.
We maintain the A1 rating on Massport's Passenger Facility Charge (PFC) revenue bonds and the A3 on the Consolidated Car Rental revenue bonds that both carry a stable outlook. The PFC bonds mature on July 1, 2017.
The stable rating outlook is based on our expectation that Massport revenues will continue to provide for debt service coverage above 2.0 times and that financial liquidity will remain above 300 days cash on hand as it debt finances about $1 billion of its capital program through 2020.
Factors that Could Lead to an Upgrade
Sustained strengthening in the airport's market position through 2016 and beyond as service area economy continues to expand and add jobs
Sustained enplanement growth and continued growth of international enplanements
Maintenance of financial liquidity above 600 days cash on hand
Removal of exposure to non-self-supporting transportation projects
Factors that Could Lead to a Downgrade
Sustained DSCRs below 2.0 times
Significant increases in airline cost per enplanement (CPE)
Debt to operating revenues above 3.5 times
Financial liquidity that falls below 250 days cash on hand
Increasing political pressure to support transportation initiatives that do not enhance Massport revenues
Operational disruptions due to new capital projects
The revenue bonds are secured by the net revenues of the authority.
Use of Proceeds
The 2016A bonds will be issued concurrently to refund the authority's Series 2007A and 2008 A revenue bonds for estimated net present value savings of $3.9 million.
The 2016B bonds will finance a portion of Massport's FY 2016-2020 Capital Program, including an expansion to Terminal E to accommodate A380 aircraft and the reconfiguration of Terminal B.
The authority is a body politic and corporate and public instrumentality of the Commonwealth of Massachusetts, which was created pursuant to Chapter 465 of the Massachusetts Acts of 1956. The Authority is divided into two projects which it owns, operates, and manages: airport facilities and port facilities. The airport facilities consist of Boston-Logan International Airport, Laurence G. Hanscom Field, and Worchester Regional Airport. The port facilities consist of the Port of Boston, which includes cargo and cruise terminals, along with the management of commercial real estate properties.
The grid is a reference tool that can be used to approximate credit profiles in the US airport industry in most cases. However, the grid is a summary that does not include every rating consideration. Please see our Publicly Managed Airports and Related Issuers rating methodology for more information about the limitations inherent to grids.
The principal methodology used in this rating was Publicly Managed Airports and Related Issuers published in November 2015. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.
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Moody's assigns Aa2 to Massachusetts Port Auth.'s Ser. 2016A&B; affirms Aa2 on parity debt; Outlook stable
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007