(Source: Business Wire)
Fitch Ratings has downgraded to 'BBB+' from 'A-' the rating on College Park, Georgia's approximately $221 million of outstanding series 2006A and 2006B revenue bonds issued to finance the construction of a consolidated rental car facility (CONRAC) and automated people mover (APM) maintenance facility at Hartsfield-Jackson Atlanta International Airport (Hartsfield-Jackson, or the airport). The Rating Outlook is revised to Negative from stable.
The bonds are secured by payments received by the issuer from the city of Atlanta under an installment purchase agreement between the two entities. The sole source of revenue pledged by Atlanta for the payments are receipts generated by the imposition of a daily customer facility charge (CFC) levied on all rental car contracts issued by rental car operators at the airport.
The rating downgrade for the CONRAC and APM bonds is based on an elevated risk profile with weaker than expected coverage levels and a forecast of rising CFC rates given the project's higher than anticipated construction costs as well as the recent downturn in rental car transactions. Earlier in 2009, the airport raised the CFC rate to $4.50 per day, up from $4.00, in order to preserve CFC revenues in the face of 10% declines in rental car transactions over the past year. Furthermore, additional CFC rate increases will be required should the airport move forward with plans to issue an additional debt financing, which would place further downward pressure on coverage levels. This additional debt may use a parity CFC credit to reimburse the nearly $90 million of project cost increases relative to the original 2006 budget related to the CONRAC facility. The airport expects to fund these costs on an interim basis from airport general revenues.
The Negative Outlook reflects concerns that additional leveraging within the next one to two years is a reasonable scenario given that the CONRAC facility will be completed and in operation later in 2009. Issuance of new CFC secured debt, either on a parity lien level or some other debt obligation, will stress overall coverage levels and availability of surplus CFC revenues for certain APM costs, particularly if rental car transactions fail to recover from the current downturn. Airport forecasts indicate that rental car transactions could fall to 5.2 million annually in 2010, off by nearly 1 million or 16% from fiscal 2008 levels. With these rental car transaction assumptions, combined with the issuance of new debt and CFC rate increases up to $6.00 per day, CFC coverage levels would result in considerably narrower coverage levels, as low as 1.10 times (x), without incorporating the funded coverage account. This coverage level would not be consistent with the current rating level.
