Fitch rates RIAC’s airport revenue bonds BBB+; outlook stable

PROVIDENCE – Fitch Ratings Inc. affirmed a BBB+ rating with a stable outlook on $67.1 million in outstanding airport revenue debt issued by the R.I. Commerce Corp.
The global rating agency also assigned the same rating with a stable outlook to $48 million for a 2016 series D and $4 million series E airport revenue bond issued by Commerce on behalf of the R.I. Airport Corp. T.F. Green Airport is in the process of constructing a runway extension.
Fitch says its rating reflects “a small market airport that is trending towards more stable traffic levels although historical performance includes weakening traffic base caused by carrier route rationalization and competition in the greater New England air trade service area,” according to the rating. “The airport maintained stable financial performance in terms of coverage and liquidity despite declining enplanements. However, the airport maintains a higher than average cost per enplanement level as a result of its use and lease agreement, which provides extraordinary coverage protection when necessary. In addition, the rating reflects RIAC’s relatively high debt levels, which are partially mitigated by healthy unrestricted reserve balances of approximately $31.4 million.”
As of fiscal 2016, the airport’s traffic base totaled 1.8 million enplanements, according to the rating, marking an amount that has declined since 2006. However, year-to-date traffic numbers through April show a show 2 percent growth in enplanements. A return to declining levels or significant loss in service would “lead to the consideration of a rating downgrade,” according to Fitch.
The rating agency also warns against cash flow coverage, saying that if levels fall below a ratio of 1.2, it could lead to a downgrade.
Boosting traffic levels to above 2 million enplanements and strengthening cash flows would be viewed positively and could result in upward rating movement, according to Fitch.
The bonds are to be issued at fixed-rate mode with a final maturity in 2046 and the series D bonds will be supported by a pledge of revenues.

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