Business Wire

Fitch Rates Cleveland, Ohio's Airport System Underlying Bank Bonds 'BBB+'; Outlook Stable.

• Report rights infringement
• published: 30 Jun 2016
• views: 0

http://www.businesswire.com/news/home/20160629006462/en/Fitch-Rates-Cleveland-Ohios-Airport-System-Underlying Fitch Rates Cleveland, Ohio's Airport System Underlying Bank Bonds 'BBB+'; Outlook Stable. NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned a 'BBB+' underlying rating to the city of Cleveland, Ohio's airport system (CLE, or the airport) bank bonds supporting outstanding senior lien $5.975 million series 2008D bonds and $30.2 million 2009D bonds. Fitch also has affirmed its 'BBB+' rating on approximately $692.4 million of outstanding airport system revenue bonds. The Rating Outlook remains Stable. Cleveland also has $91.3 million in parity series 2013A and 2014AB bonds purchased by U.S. Bank National Association that are not rated by Fitch. The rating reflects a midsize airport market transitioning from a domestic-focused hub to a more traditional origination/destination profile with approximately 4 million enplanements. Traffic is beginning to see positive recovery following United Airlines's (Long-Term Issuer Default Rating [IDR] 'BB-'/ Outlook Positive) flight reductions several years ago. The rating also incorporates the airport's stable financial profile with indenture coverage in the 1.3x-1.4x range and a strong balance sheet, although leverage is considered elevated at 8.6x. The rating is further supported by the airport's modest near-term capital needs which are unlikely to require future borrowing. KEY RATING DRIVERS Revenue Risk - Volume: Midrange Midsize Market Transitioning: Cleveland's total traffic base is approximately 4 million enplanements and United remains the dominant carrier at Cleveland, although at lower concentration levels since its decision to eliminate its connecting-based operations as well as some O&D; service. Low-cost carriers have entered the market, helping to backfill routes and lower average ticket prices. Revenue Risk - Price: Midrange Above-Average Cost Profile: Airline revenues represent a relatively high share of airport operating revenues. The high average airline cost structure (estimated at $18.50 CPE for 2015) is substantially a burden on United due to their special facility leases for Concourse C and D through May 2029. The non-United carriers have more competitive CPE levels with which to operate from Cleveland. The existing airline agreement is residual-based rate-setting, and a five-year extension with similar terms is likely, starting in 2017. Infrastructure & Renewal Risk: Stronger Moderate Infrastructure Plan: The airport's infrastructure is viewed to be in sound condition and the five-year capital improvement program (CIP) is estimated at $94 million funded through grants, existing bond proceeds, or private investment. Debt Structure: Stronger Conservative Debt Structure: The system's debt is approximately 88% fixed-rate debt and 12% unhedged variable-rate bonds. Bond documents provide for solid reserves and adequate coverage requirements. High Debt and Strong Liquidity: The airport's total net debt-to-cash flow available for debt service (CFADS) is elevated at 8.6x. Visit CHAOS View Archive For More CHAOS NEWS: https://www.youtube.com/channel/UCUiFq-IUU64l62ygPdbVnIA