TEXT-Fitch raises Fla. Dot's $270mm TIFIA loans to 'A-' from
July 11 - Fitch Ratings upgrades the Florida Department of Transportation's (FDOT) $270,000,000 Transportation Infrastructure Finance and Innovation Act (TIFIA) Rental Car Facility (RCF) loan for the Miami Intermodal Center (MIC) to 'A-' from 'BBB'. The Rating Outlook is revised to Stable from Positive. The upgrade is based on successful project completion including the rental car facility and associated MIA Mover project, a year of successful operations and better than expected rental car activity and related customer facility charge (CFC) collections. The combination of these factors as well as lower project operating costs could result in the TIFIA loans being repaid well ahead of prior forecasts. The rental car facility was completed in July 2010 while the MIA Mover was placed in operation in September 2011. Since opening of these facilities, project operating costs appear to be within budget. With the support of strong airport passenger traffic growth at Miami International Airport over the past three years, rental car transaction days have surged 24% which is well ahead of earlier forecasts. Revised base case forecasts indicate the TIFIA debt can be paid off in 2024, which is well ahead of both the initial projection of 2037 when final TIFIA loan was made in 2007 and the TIFIA scheduled final maturity of 2044. KEY RATING DRIVERS: STRONG RENTAL CAR MARKET: Miami International Airport (MIA) is a major international gateway which supports a sizable rental car market to serve both international and domestic destination passengers. While rental car transactions have risen in recent years, some volatility exists in conjunction with passenger traffic levels. The rental car market is well diversified with 16 participating companies. Alamo is the largest contributor to customer facility charge (CFC) revenues and represents about 27% of total collections. SUPPORTIVE REVENUE FRAMEWORK: Based on existing transaction levels, the project loans can be repaid solely from the CFC payments. The current rate is $4.60 per day is moderate when compared to those at other large hub airports and, pursuant to loan documents, will increase by $0.25 every fifth year starting in 2015. If CFC collections were insufficient, the rental car companies would be obligated to pay contingent rent to support a minimum 1.30 times (x) project life coverage ratio (PLCR). ESSENTIAL PROJECT WITH CONSTRUCTION PHASE COMPLETED: The rental car facility (RCF) is an essential airport project as a core element to the Miami Intermodal Center (MIC) regional transportation hub. Both the RCF and the related Miami Mover rail-line connecting to the airport passenger terminal have been successfully completed. FLEXIBLE REPAYMENT SCHEDULE WITH EARLY AMORTIZATION EXPECTED: The TIFIA loan structure focuses on ultimate recovery by Oct. 1, 2044 by sizing amortization payments to a percentage of available funds. Current financial forecasts indicate full repayment as much as 20 years ahead of the final maturity date even under scenarios with a significant reduction in transaction days. IMPROVING FINANCIAL PROFILE: The project has low leverage, robust liquidity and high debt coverage ratios. The rapid increase in rental car transaction days and pledged CFCs allows for a favorable project life coverage ratio (PLCR) and net debt to cashflow available for debt service (CFADS) ratios through maturity. Even with a modest 1% per annum growth rate in transaction days, average PLCR and net debt to CFADS ratios would be 4.9x and 3.0x, respectively. WHAT COULD TRIGGER A RATING ACTION: --Continued strong performance of CFC revenues and lower operating costs that allows for ongoing robust PLCR levels and project leverage to fall into the 3.0x range. --Reductions in rental car activity in the range of 20% or more from current levels due to enplanement trends; --Operational or cashflow underperformance that leads to a potential reliance on contingent rent from rental car companies to support loan payments. SECURITY: The loans are secured by CFCs levied by Miami-Dade County, Florida on rental car transactions at MIA, and to the extent that CFC revenues are insufficient, contingent rent on the participating rental car companies operating at the RCF. CREDIT UPDATE: CFC revenue and rental car transaction volumes are well ahead of previously indicated base case forecasts. In fiscal 2011, pledged CFC deposits rose nearly 40% to $37.2 million based on both a 16.5% increase in transaction days and a scheduled 15% CFC rate increase to $4.60 per day. Activity continues to exceed expectations as fiscal 2012 figures through April indicate collections of $25.5 million compared to $21.3 million for the same period in fiscal year 2011. Fiscal 2012 through April had transactions days of 5.5 million, a 20.5% increase, when compared to transactions days of 4.6 million for the same period in fiscal 2011. Growth in passenger traffic at the airport is supporting the recent robust trends in rental car activity, although volatility in performance is likely over time. Actual non-transportation RCF operating expenses have come in well below forecast since the opening of the facility in July 2010. For FY 2012, budgeted RCF operating expenses total $3.6 million versus a $5 million budget anticipated in previously provided projections. The MIA Mover linking the MIC to the airport has opened in September 2011 and it is initially assumed that about half of the users will be for rental car customers. The Miami Central Station, a rail and bus station on 16.5 acres, is expected to open in late 2013 which will essentially complete the entire transportation hub complex. There is a diverse mix of rental car operators, all of which executed 15-year contracts that initially extend to 2025. Alamo is the largest operator comprising about 27% of CFC collections followed by Hertz, Avis and Dollar. All rental car customers of these signatory operators at Miami airport are required to use the rental car facility which enables a strong capture of CFCs from all rental car transactions in the local market. The TIFIA loans consist of two borrowings totaling $270 million with a scheduled final maturity in 2044. The loans represent a highly structured financing with a cash waterfall managed by a trustee using the financial advisor's (Jeffrey A. Parker) computer model. Periodic interest is accruing through Oct. 1, 2012 with principal amortization to begin on that date based on 30% of the balance then in the project's secondary reserve fund. There is no pre-set amortization schedule, a feature that limits default risk to the final maturity date. Reserves are very robust, at a combined level in excess of $70 million, when including the project's operating reserve fund, secondary reserve fund, and debt service reserve fund. Fitch's base case forecast taking into account the recent trends in CFC collections but with a conservative 1% growth rate in future periods, indicates a repayment date by 2024. This updated amortization is much earlier than the sponsor's original forecast of 2037. Under this base case, the project life coverage ratio remains at or above 2.8x while leverage peaks at 6.1x on a net debt to cashflow basis. Fitch's rating case analysis, which incorporates a 20% loss in CFC collections in 2013 followed by a moderate recovery, indicates the final repayment date could push back to 2027 without the need for levying any contingent rent on the rental car operators. An amortization date of 2027 is still well ahead of the final maturity in 2044 and allows for significant flexibility for adverse developments with rental car activity. Under this rating case, the project life coverage ratio remains at or above 2.1 times while leverage peaks at approximately 8.0x on a net debt to cashflow basis. Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
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