LOS ANGELES — McCarran International Airport in Las Vegas received a one-notch upgrade on its revenue bonds from Moody's Investors Service ahead of plans to price $187.7 million in two separate transactions next week.
"We anticipate this upgrade will help us to achieve additional savings as a result of the upcoming refundings which will only help further strengthen our financial position," said Joseph Piurkowski, chief financial officer for the Clark County Department of Aviation.
The Clark County Department of Aviation on Tuesday plans to price the $67.1 million Series 2017 A-1 (AMT) and $49.7 million Series 2017A-2 (non-AMT), both subordinate lien refunding revenue bonds.
On Thursday, it will price the $70.9 million 2017 Series B (AMT) passenger facility charge refunding revenue bonds.
JPMorgan is senior underwriter on the 2017A bonds and Morgan Stanley is lead manager on the Series B bonds. Hobbs, Ong & Associates Inc. and PFM are financial advisors and Sherman & Howard LLC is bond counsel on both transactions.
Moody's upgraded by one notch the airport's outstanding senior lien revenue bonds to Aa2, outstanding subordinate lien bonds to Aa3, outstanding PFC bonds to Aa3, and outstanding junior subordinate lien and Jet Fuel A tax bonds to A1.
It assigned an Aa3 rating and stable outlook to all three series pricing next week.
The upgrade reflects the airport's "stable financial profile, limited capital needs and strong cash position," Piurkowski said.
Moody's did not upgrade the airport's general obligation limited tax bonds, because the GOLT bonds, rated Aa1 stable, are based on the credit profile of the county's tax base and not the airport, Moody's analyst Earl Heffintrayer said in an interview. Since the rating is higher than the airport's GARB rating, he said, it is unaffected by the upgrades.
S&P Global Rating assigned an A-plus rating with a stable outlook to the bonds and affirmed existing ratings including an AA-minus rating on senior-lien debt.
"The ratings reflect our view of a diversified and stable market with historically positive demand trends; adequate coverage levels, and good overall management," said S&P analyst Todd Spence.
The airport's reliance on tourism and a moderately high debt burden partially offset these strengths, Spence said.
Moody's cited in the upgrade the airport's stable operating and financial profile that compares favorably to its large hub peers, which are mostly adding significant leverage and airline costs over the next few years.
McCarran completed $3.2 billion in improvements from fiscal year 2007-2013 and doesn't plan to issue any major debt over the next five years, according to its offering documents.
"The enterprises annual debt service obligations will remain relatively flat in the near-term peaking in 2022 before declining thereafter and there is no need for additional bond issuances to fund the capital plan," Moody's analysts Heffintrayer and Kurt Krummenacker wrote.
The current plan contains $421 million of projects, funded mostly by $318.5 million in deposits to the capital improvement account, $61.3 million in federal grants, $41.6 million in prior bond proceeds, according to Moody's.
The largest projects in progress include the Terminal 1 ticketing counter and flooring modernization and international capacity enhancements connecting Concourse D to the Customs and Border Patrol facility in Terminal 3, which is nearing completion, Moody's analysts wrote.
Outstanding debt has declined from $4.5 billion in 2012 to $4.2 billion in 2016, Moody's wrote.
The airport's leverage will drop as the airport enters a period of more "rapid amortization, particularly with respect to variable rate demand debt," the Moody's analysts wrote.
Some, but not all, of the de-leveraging will result from the upcoming bond sales, Heffintrayer said.
The 2017A and 2017B bonds both reduce debt service through interest savings, but the 2017B bonds also accelerate some principal payments given the higher recent passenger facility charge and available PFC balances, Heffintrayer said.
Enplanements grew by 6.7% at the airport, which is the largest commercial airport in Nevada, according to the Moody's report.
"The higher PFC debt service allows the airport to de-lever at a quicker rate while maintaining steady costs to airlines," Heffintrayer said. "The upcoming reduction in variable rate demand bond exposure was scheduled, before this current transaction."
