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Rating Action:

Moody's assigns Baa2 to Grand Junction Regional Airport Authority, CO's revenue bonds; stable outlook

19 Oct 2016

New York, October 19, 2016 -- Issue: General Airport Revenue and Refunding Bonds, 2016A (Non-AMT); Rating: Baa2; Rating Type: Underlying LT; Sale Amount: $18,730,000; Expected Sale Date: 10/27/2016; Rating Description: Revenue: Government Enterprise;

Issue: General Airport Revenue and Refunding Bonds, 2016B (Taxable); Rating: Baa2; Rating Type: Underlying LT; Sale Amount: $2,845,000; Expected Sale Date: 10/27/2016; Rating Description: Revenue: Government Enterprise;

Summary Rating Rationale

Moody's Investors Service assigns Baa2 to Grand Junction Regional Airport Authority, Colorado's General Airport Revenue and Refunding Bonds, 2016A (Non-AMT) and General Airport Revenue and Refunding Bonds, 2016B (Taxable). Concurrently, Moody's affirms the Baa2 rating on the outstanding General Airport Revenue Bonds Series 2007. The outlook is stable. Proceeds will be used to refund the airport's currently outstanding airport revenue bonds and provide new money to finance various terminal improvements. The authority also has $1.5 million outstanding on a Colorado State Infrastructure Bank note, not rated by Moody's, which is scheduled to be retired in 2019. The note is payable to the Colorado Department of Transportation and is secured by customer facility charges (CFCs), and, to the extent CFCs are insufficient, by general airport revenues.

The Baa2 rating reflects the small size of the authority's service area and the limited air service offering at Grand Junction Regional Airport (GJT), the authority's sole facility. Enplanements grew steadily into the mid 2000s, peaking at 232,000 in 2009. Although relatively resilient during the recession, the enplanement trajectory has flattened into one of lower growth than experienced pre-2009, consistent with our expectation that small and non-hub airports, like GJT, will experience below industry average growth relative to large hubs. GJT remains the dominant provider of air service in what is a remote area with limited immediate competition. The relatively concentrated passenger air service at GJT is mitigated by the receipt of non-airline revenues and the presence of fixed-base operator West Star Aviation, whose maintenance, fueling and technical operations extend to military and general aviation aircraft and diversify the authority's revenues.

Consistently strong debt service coverage ratios (DSCRs) and adequate liquidity also balance the relatively weak market position and small size of the authority, as do our expectations that airline costs and leverage metrics will remain manageable going forward. These expectations are supported by the authority's focus on stabilizing rates and charges in airline-related cost centers, and by its near-term capital program, which is primarily grant-funded, and is not expected to require additional debt.

Rating Outlook

The stable outlook is based on our expectation that enplanements will remain stable, and that both DSCRs and liquidity will remain sound at above 1.6 times and 300 days (cash on hand), respectively.

Factors that Could Lead to an Upgrade

Significant enplanement growth and increased air service offerings

Consistently stronger total DSCRs and liquidity, with DSCRs above 2.5 times and liquidity above 600 days cash on hand

Factors that Could Lead to a Downgrade

Loss of a carrier or reduced service offering resulting in declining enplanements

Narrower financial margins with total net revenue debt service coverage falling below 1.5 times

Days cash on hand to below 300 for a sustained period

Legal Security

The 2016 bonds are secured by a prior lien on pledged revenues of the airport consisting of net general airport revenues and eligible PFCs. Additional security is provided by a debt service reserve fund sized at the lesser of maximum annual debt service on all outstanding bonds or the tax maximum.The resolution includes a stronger, traditional net revenue rate covenant, requiring net revenues to cover the greater of average annual debt service by 1.25 times in each fiscal year.The additional bonds test requires net revenues to be equal to or greater than 1.25 times aggregate annual debt service.

Use of Proceeds

Proceeds will be used to refund the airport's currently outstanding airport revenue bonds and provide new money to finance various terminal improvements.

Obligor Profile

Grand Junction Regional Airport (GJT) is a non-hub regional airport serving origin and destination (O&D) passengers. GJT is located on the west slope of the Rocky Mountains, approximately equidistant to Denver and Salt Lake City, both of which are 260 miles and over four-hour drives from Grand Junction.GJT is located on approximately 2,850 acres of land. GJT has two runways: runway 11/29 is capable of handling commercial, military, and general aviation traffic, and crosswind runway 4/22 is designed to accommodate smaller aircraft. The passenger terminal building has over 76,000 square feet of space and two loading bridges. The airport currently owns three rental car service facility buildings. Parking for the passenger terminal building includes over 675 spaces in a paved lot. West Star aviation provides maintenance, repair and overhaul (MRO) and fueling operations at GJT, occupying over 250,000 square feet of space and employing over 300 full-time staff.

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.

Moses Kopmar
Lead Analyst
Project Finance
Moody's Investors Service, Inc.
One Front Street
Suite 1900
San Francisco 94111
US
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Kurt Krummenacker
Additional Contact
Project Finance
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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