Fitch Downgrades MWAA Bonds Ahead of $192M Refunding

WASHINGTON— Fitch Ratings downgraded the Metropolitan Washington Airports Authority’s airport revenue bonds to AA-minus from AA as it prepares to issue $192 million of refunding bonds.

The downgrade, which was announced Friday and will apply to the new bonds as well as $5.1 billion of outstanding MWAA debt, was based on a “stable but narrower” debt service cushion compared to historical performance and previous forecasts, according to Fitch. The rating agency revised the bonds’ outlook to stable from negative.

Specifically, the newly assigned AA-minus ratings would apply to the authority’s planned $134 million of Series 2011C airport system revenue refunding bonds that would be subject to the alternative minimum tax, $9 million of Series 2011D bonds that would not be subject to the AMT, and $49 million of Series 2011E taxable bonds..

The lower rating may raise rates for the new issues. But MWAA spokesman Robert Yingling said the authority estimated $13 million in net present-value savings would result from refunding the old debt.

Fitch said the authority’s continuing borrowing for most of its capital construction has produced an “elevated debt-burden profile and will require increased reliance on airline charges” to meet the airports’ cash-flow requirements.

The MWAA will likely maintain its 1.3 times debt service cushion ratio, Fitch said, but moderate to severe stress on passenger traffic could require it to invoke “extraordinary coverage protection measures” in airline agreements to maintain the minimum 1.25 times coverage ratio required in bond covenants.

On Thursday, Moody's Investors Service assigned a Aa3 rating for the new refunding bonds and maintained that rating on outstanding debt, both with a negative outlook. Moody's also cited declining debt service coverage. It said costs per passenger were rising and cited uncertainties about federal aviation spending and the possible impact of federal budget cuts on the Washington metropolitan area.

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Transportation industry Washington
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