Standard & Poor’s on Friday raised its rating on Okaloosa County’s airport revenue bonds to BBB from BBB-minus based on revised liquidity and debt-service coverage calculations.
The rating change affects $9.7 million of debt and the outlook is stable, according to analyst Adam Torres.
The rating reflects recovering enplanement trends and good debt service coverage offset by a small traffic base with a high airline-carrier concentration with Delta Air Lines’ contracted carrier, Atlanta Southeast Airlines, representing 45% of total enplanements at Okaloosa County Regional Airport in fiscal 2007, Torres said.
The high air carrier concentration exposes the airport to service decisions by Delta, which resulted in a 9% drop in enplanements in fiscal 2006. That drop was tempered by a 6.7% increase in fiscal 2007.
The airport had somewhat constrained enplanement growth due to its proximity to the larger Pensacola Regional Airport, which provides greater service to more destinations, Torres said.
The credit risks are partially mitigated by credit strengths including a strong liquidity position, with unrestricted cash and investments in 2007 providing about 649 days of operating expenses, good pro forma maximum annual debt service coverage of approximately 2.6 times based on preliminary results from the fiscal year ending Sept. 30, and manageable capital needs that require no additional debt.
“We expect that enplanements will continue to rebound and demonstrate steady upward trends,” Torres said. “Given the exposure to competition and the airport’s airline concentration, maintaining a strong liquidity position is an important consideration to the stable outlook.
“Should there be material service reductions that affect overall enplanements, the rating could be negatively affected,” Torres added.
