NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned an 'A' rating to approximately $367 million joint revenue improvement bonds, series 2013C, $379.8 million joint revenue improvement bonds, series 2013D, and $415.6 million joint revenue improvement bonds, series 2013E, issued by the cities of Dallas and Fort Worth, Texas for Dallas - Fort Worth International Airport (DFW). In addition, Fitch has affirmed approximately $5.4 billion in outstanding DFW joint revenue improvement bonds at 'A'. The Rating Outlook is Stable.
KEY RATING DRIVERS
SIZABLE TRAFFIC BASE SUBJECT TO CONCENTRATION AND CONNECTING EXPOSURES: DFW is located in a strong primary market area that generates strong demand for air service. DFW has a base of 29 million total enplanements, of which 12 million are origination/destination. Further, DFW's favorable central geographic location provides for a well-balanced traffic profile for both domestic and international passengers. Revenue Risk - Volume: Midrange.
STRONG RATE SETTING MECHANISMS: The current airline use agreement (which runs through 2020) allows for timely recovery of costs within all airline cost centers. The agreement also provides for adequate cash flow generation to meet all funding requirements under the bond documents as well as funding for renewal and replacement. Airline costs are currently low for a large-hub airport at $6.59. However, they will double over the next five years as airport capital spending is funded, even under conditions of traffic growth. Revenue Risk - Price: Stronger.
FIXED RATE, LOW COST CAPITAL STRUCTURE: All of DFW's debt is issued in fixed rate mode with generally conservative debt amortization. Debt peaks at $6.5 billion in 2014 and nearly 30-50% of debt service is paid from passenger facility charges over the next three years. Debt Structure: Stronger.
STABLE BUT MORE LEVERED FINANCIAL POSITION: Debt service coverage and liquidity metrics have been sound. In fiscal 2012, debt coverage was 1.51 times (x) combined (including the use of rollover coverage funds) with over 700 days cash on hand. High leverage remains a concern as debt per enplanement is expected to increase from $161 to $200 in fiscal 2013 (ended Sept. 30) and from $385 to above $500 per origination enplanements. Debt Service and Counterparty Risk: Midrange.
LARGE SCALE CAPITAL PROGRAM WITH RELIANCE ON ADDITIONAL BORROWINGS: Much of the $2 billion terminal renewal and improvement program as well as another $2.2 billion of airport improvements will be funded by up to $2 billion of additional borrowings. Prudent management of capital spending and borrowings will be critical to credit maintenance. Infrastructure Development and Renewal: Midrange.
RATING SENSITIVITIES
--Enplanement Declines: Losses in total enplanements that signify a change in American's total support at DFW (15%-25% reduction from current levels).
--Lack of Adequate Revenue Growth: Flat or declining airline and non-airline revenue for a period of multiple years.
--Borrowing Beyond the Current Plan: Significant additional borrowing beyond the airport's current plan.
SECURITY
The bonds are secured by an irrevocable first lien on gross revenues generated by the operation of DFW, as well as passenger facility charge revenues to the extent they are specifically pledged to an individual series of bonds.
TRANSACTION SUMMARY
Net proceeds of the series 2013C bonds will be used to finance capital improvements at DFW airport. Net proceeds of the series 2013D and 2013E bonds will be used to refund previously issued bonds. The bonds will be fixed rate obligations with final maturity of Nov. 1, 2045 for series 2013C and Nov. 1, 2033 for series 2013D and 2013E
For additional information on DFW, please see the Fitch release 'Fitch Downgrades Dallas-Fort Worth Airport to 'A'; Outlook Stable'; dated April 5, 2013 available at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Rating Criteria for Infrastructure and Project Finance' (July 12, 2012);
--'Rating Criteria for Airports' (Nov. 28, 2012).
Applicable Criteria and Related Research:
Rating Criteria for Infrastructure and Project Finance
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682867
Rating Criteria for Airports
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695600
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=793190
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