Fitch Ratings said it has upgraded the rating on College Park, Ga.'s approximately $198.7 million of outstanding series 2006A and 2006B revenue bonds to A-minus from BBB-plus.
The bonds were issued to finance the construction of a consolidated rental car facility (CONRAC) and automated people mover (APM) maintenance facility at Hartsfield-Jackson Atlanta International Airport (Hartsfield-Jackson, or the airport).
The rating outlook is stable.
The upgrade reflects the increased financial flexibility and favorable trends in debt service coverage and liquidity. The recent customer facility charge (CFC) rate increases coupled with robust growth in transaction days produced higher than anticipated, robust debt service coverage ratios and growing reserve balances. Debt service coverage levels are forecast to remain in the 1.8 times (x) to 1.9x range even in a little- to no-growth scenario. Underpinning the improved coverage is the continued enplanement growth, from 43.3 million enplaned passengers to 47.1 million from 2008 to 2012, or 2.1% CAGR, experienced at the airport. Additionally, no further CFC rate increases are projected to be needed to maintain or grow current coverage levels given the flat debt service profile.
A sizable underlying local market supports a high level of rental car transactions with 15.4 million origination/destination (O&D) enplanements and 6.1 million rental car transactions in fiscal year (FY) 2012. Rentals have proven more volatile than enplanements in recent years;, however, total transaction days has returned to pre-recession levels. Airport traffic at Atlanta is highly dependent on Delta Air Lines' service (78% of total enplanements), and thus rental car demand would be exposed to the carrier's operating decisions.
Implementation of the rental car CFC has been effective since 2005 and covers all car rental operators whether located on-airport or off. The CFC is assessed without cap or sunset by an ordinance of the Atlanta City Council. The CFC rate is currently $5.00 per day and has not increased since July 2010 nor is it expected to increase throughout the five-year forecast period.
The project structure is underpinned by a first lien on CFC monies and, if needed, contingent rent levied to the rental car operators. While the secured revenue stream is narrow in its nature, dedicated project reserves are robust, including a cash-funded debt service reserve that is supplemented by a debt coverage account, renewal & replacement reserve, and surplus fund.
The project's overall leverage, including the revenue bonds as well as a $72 million internal subordinated loan with the airport, equates to approximately 7.1x net debt to cash flow available for debt service (CFADS). However, senior lien leverage is more moderate at 4.9x and FY 2012 senior debt service coverage is 1.8x from operating cash flows. The strong debt service coverage ratios allow for sufficient serving of the subordinate loan and project operating costs.
The completion of the project negates construction risk with minimal capital expenditures projected over the intermediate term. The project faced higher total costs than initially planned and resulted in the project assuming a subordinate loan. The car rental project support is enhanced by facility agreements which were signed by all rental car companies serving the airport. These agreements extend to the end of the maturity of the outstanding bonds.