Wayne County Airport Authority upgraded
DALLAS-- Wayne County Airport Authority in Michigan got a one notch ratings boost on its senior and junior bonds ahead of a sale of new money and refunding bonds.
Fitch Ratings upgraded the bonds to A from A-minus. The upgrade Monday cited Detroit Metropolitan Airport's favorable operating and financial trends that are supported by its central location and its demonstrated essentiality to Delta Air Lines. The airline has a lease agreement extending through 2032.
“In Fitch's view, the airport debt service coverage and cost metrics should continue to remain stable while leverage moderates to levels lower than prior periods despite additional debt to support capital investments,” Fitch wrote.
“We appreciate the vote of confidence these ratings demonstrate for our team and operation,” said Wayne County Airport Authority CEO, Joseph Nardone, in a statement.
Moody’s Investors Service affirmed the airport revenue bonds senior rating of A2 and junior rating of A3. S&P Global Ratings affirmed the rating on the senior bonds at A and the junior bonds at A-minus. Fitch rates both the junior and senior at the same level because “key credit metrics including leverage and coverage are at very comparable levels.”
The $277 million bond sale scheduled for Sept. 27 will offer $169.8 million of senior notes and $107.7 million of junior notes. About $100 million of the senior note offering will fund new money projects.
“The proceeds of the Series 2017 Airport Revenue Bonds will be used for airfield infrastructure projects, fleet and equipment purchases, bridges and roadway rehabilitation and various terminal improvements,” the authority said.
The refunding portion of the senior bonds and the junior bonds are expected to generate a total present value savings of approximately $12.9 million and $20.6 million, respectively.
Senior managing underwriter is Bank of America Merrill Lynch and bond counsel is Miller, Canfield, Paddock and Stone, P.L.C.
Detroit Metropolitan Airport serves an air trade area that encompasses a population of 5.3 million. The nearest competing commercial airport is 150 miles away in Cleveland, Ohio.
The airport’s passenger traffic continues to increase. Moody’s said enplanements at Detroit Metropolitan Airport grew 4.2% in fiscal 2016 following two years of small increases of 0.9% and 1.4% in 2014 and 2015. Enplanements are up 0.5% for the first 9 months of FY 2017 in line with the authority's full year projection, but below growth at other US hub airports.
Delta dominates as chief carrier representing 74% of enplanements at Detroit Metropolitan. However low cost carrier airline market share has increased to 14.4% in fiscal 2016 from 12.6% in fiscal 2015.
The authority has around $2 billion in long term debt outstanding and 20% of that is based on a variable rate. The airport's outstanding debt also includes several series of privately placed bonds.
Detroit Metropolitan Airport’s current capital program, sized at $828 million over the next five years, will be funded from a combination of proceeds from previous issuance, grants, and new money borrowing. Approximately $51.4 million in additional debt is expected to fund the projects.
The authority was created by state statute in 2002 and is a separate legal entity from Wayne County. It is governed by a seven-member board with four members appointed by the county executive; two by the governor and one by the Wayne County Commission.