NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned an 'A' rating to approximately $259.4 million joint revenue refunding bonds, series 2013F and $123.7 million joint revenue improvement bonds, series 2013G, issued by the cities of Dallas and Fort Worth, Texas for Dallas - Fort Worth International Airport (DFW). In addition, Fitch has affirmed approximately $6.1 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. The bankruptcy situation of DFW's leading carrier, American Airlines, (83% of enplanements) as well as the efforts for American to merge with US Airways has not impacted operations. Fitch will continue to monitor both of these developments. Revenue Risk - Volume: Midrange.
STRONG RATE SETTING MECHANISM: 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 $6.54. 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. Aggregate general airport debt is projected to peak at $6.5 billion in 2014 and approximately 30%-50% of future debt service is expected to be paid from passenger facility charges (PFC). Debt Structure: Stronger.
STABLE BUT MORE LEVERED FINANCIAL POSITION: Debt service coverage and liquidity metrics have been sound. In fiscal 2012 (ended Sept. 30), debt coverage was 1.51 times (x) combined (including the use of rollover coverage funds) with more than 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 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. While there have been some recent modest upward revisions to the TRIP budget, Fitch currently does not see this development as a material credit concern; however, 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 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 operations of DFW, as well as PFC revenues to the extent they are specifically pledged to an individual series of bonds.
TRANSACTION SUMMARY
Net proceeds of the series 2013F bonds will be used to refund previously issued series 2003 bonds with maturities from 2014-2033. Net proceeds of the series 2013G bonds will be used finance capital improvements at DFW airport. The bonds will be fixed rate obligations with final maturity of Nov. 1, 2033 for Series 2013F and Nov. 1, 2045 for the Series 2013G bonds.
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 11, 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=801244
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