New York, May 18, 2021 -- Moody's Investors Service, ("Moody's") upgraded
the rating assigned to $400 million (original outstanding amount)
of senior secured bonds issued Aerostar Airport Holdings, LLC.
("Aerostar") to Ba1 from Ba2. The outlook is stable.
RATINGS RATIONALE
Aerostar's rating upgrade to Ba1 from Ba2 incorporates the airport's dominant
market position as the largest airport and gateway to San Juan,
Puerto Rico, with strong credit fundamentals that limit its exposure
to the weak credit quality of the Commonwealth of Puerto Rico (Ca negative).
Supporting Aerostar's credit quality is the demonstrated resiliency
to external shocks that have had material negative impacts on the island.
Given Aerostar's strong travel linkages with the US mainland and
the lack of travel alternatives, the consequences of Hurricane Maria
in 2017, a 6.4 magnitude earthquake in January 2020,
as well as the ongoing COVID-19 pandemic have not been meaningful
and short-lived when compared to other infrastructure assets located
in Puerto Rico.
Aerostar has also outperformed most U.S. and Latin American
airports with a strong recovery of passengers in 2021 as the share of
US population getting vaccinated continues to rise. The COVID-19
outbreak and travel restrictions led to a traffic decline of close to
50% in 2020 with respect to 2019. By the first quarter of
2021, Aerostar traffic recovered to 77% of 2019 traffic against
the same period in 2019 and for the month of April, enplanements
have already surpassed 2019 levels.
Revenues are even more resilient than traffic in part due to the Airport
Use Agreement (AUA) with airlines that sets a revenue floor for the airport
regardless of actual enplanements. In 2020, revenues practically
remained flat against 2019 despite the material loss of enplanements.
Aerostar recorded a funds from operations to debt ("FFO/Debt") ratio of
18.2% as of December 2020, reflecting the airport's
moderate leverage, and cash interest coverage ("CIC") was 3.9x,
indicating that it is generating ample cash to maintain operations and
meet borrowing costs. Given the inflation indexed tariff adjustments
and amortizing profile of the debt, key financial metrics should
continue to improve over time. Aerostar's credit quality
is also underpinned by its strong liquidity position including a 12-month
Debt Service Reserve Account.
The stable outlook incorporates our expectation that enplanement levels
will remain resilient to Puerto Rico's operating environment, and
that revenues will continue to grow as a result of inflation-indexed
tariffs.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's assessment that Aerostar is completely delinked to common
credit risks with Puerto Rico coupled with a solid traffic performance
and maintaining interest coverages above 3.5x and FFO/Debt above
18% on a sustained basis would exert upward credit pressure on
the rating.
Downward pressure on the ratings would be triggered by slower enplanement
levels due or lower revenues that lead to cash interest coverages below
2.0x and FFO/Debt below 10% on a sustained basis.
The principal methodology used in these ratings was Privately Managed
Airports and Related Issuers published in September 2017 and available
at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1092224.
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
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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
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affected the rating. For further information please see the ratings
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and whose ratings may change as a result of this credit rating action,
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if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
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review.
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and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1263068.
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
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Adrian Garza
Vice President - Senior Analyst
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