Hawaii airport deal scores a positive outlook ahead of pricing

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Hawaii's airport debt received an improved outlook to positive from Moody’s Investors Service on anticipated enplanement growth ahead of plans to price $197 million in taxable revenue bonds on Wednesday.

Moody’s affirmed an A1 rating on $975.8 million in senior lien bonds and an A2 on $167.7 million certificates of participation.


“The positive outlook reflects the progress on completion of the major capital plan items on budget and the potential for increased enplanement levels spurred by the arrival of Southwest to the market,” Moody’s analysts wrote in a Friday report.

Southwest Airlines began serving Hawaii from the mainland in March.

The addition of Southwest to the market, and increased service by other airlines, is expected to grow enplanements at or above the forecasted compound annual growth rates of 1.3% through 2025, barring an economic recession, Moody's wrote.

Total enplanements have increased by 23% since 2009 hitting 18.8 million in fiscal year 2018, according to bond documents.

The bonds will be priced by Bank of America Merrill Lynch as lead manager and Morgan Stanley as co-senior manager. PFM is municipal advisor and Katten Muchin Rosenman is bond counsel.

S&P Global Ratings assigned an A-plus rating with a stable outlook ahead of the deal. Fitch Ratings hasn’t released a pre-deal report, but assigned an A rating with a stable outlook to $245.6 million in bonds issued a year ago for the rental car facility.

The bonds will be federally taxable, but exempt from Hawaii state taxes. The senior lien bonds are secured by a pledge on net revenues of the airport system and aviation fuel tax revenues.

Half of the capital projects are “either in construction or in the close out phase and a significant portion will be completed over the next two years, providing positive pressure on the rating,” Moody’s wrote.

Moody’s cited the airport system’s monopoly over commercial air travel to and from the islands, the essentiality of air service for both tourism and intrastate travel, full cost recovery without subsidies to airlines and relatively low debt for the rating.

“The airport system's liquidity is a key measure of its financial strength and while restricted cash will decline as the large on-going capital improvement program is implemented, Moody's expects unrestricted cash to be maintained above 600 days cash on hand (DCOH) levels at the current rating,” analysts wrote.

The strengths are offset by the construction risk associated with the capital program, which Moody's said is the largest program undertaken by the airport.

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Ratings Airport revenue bonds Primary bond market State of Hawaii Hawaii
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