Leveraging CFCs Using Consolidated Facility Charges to Fund Airport Projects

Transcription

1 Leveraging CFCs Using Consolidated Facility Charges to Fund Airport Projects Jessica Soltz Rudd Senior Director 2007 ACI-NA Economics & Finance Conference May 22, 2007

2 Agenda Using CFC Revenues Pay-go or reimbursement GARB GARB with CFC support Project finance bond Example: complex multi-party, multi-lien structure Conclusion 1

3 Pay-go or Reimbursement CFC is a distinct reliable revenue stream Separate & distinct from privilege, ground, and O&M fees Project supported by currently available funds Either paying with CFC revenues Or reimbursing with CFC stream Either way aggressive assumptions could lead to capital crunch and impact an airport s credit if Construction costs escalate or rental usage drops Efficient? 2

4 GARB Key Rating Considerations Service area and operational analysis Passenger demand & traffic composition Airport competition Airline analysis Financial operations Balance sheet, operating statement and cash flow evaluation Forecast analysis Ratio and comparative analysis Airport management and capital planning Bond legal structure Security: consolidated revenue stream that includes the CFC 3

5 GARB with CFC Support Start with GARB analysis Similar GARB issues of airport s economic model Evaluate separate cash flow within the larger consolidated stream Unintended consequences: Potential drag on airport s future cash flow/debt coverage Capex needs Airport s future financial flexibility affected? 4

6 CFC-Supported Project Finance Financing based on economics of stand-alone project Market demand for rental cars/competition Relationship of car rentals & aviation demand in specific market Historical trends: Transactions = renters x contract days Projections Narrow revenue base CFC revenues = bondholder security CFC rate: capped or floating Contingent rent Debt Structure Construction related issues Rental car operators 5

7 Benefits of Off-Balance-Sheet Transactions to Airports Pros Cons Preserves airport debt capacity Retains balance sheet strength Lower CPE Limits an airport s exposure to operating risk Reduces airport control of facility Limits upside revenue potential Potential for bankruptcy of obligor and project disruption Project may not be well devised for other/future users 6

8 Example: Complex Multi-party, Multi-lien Structure Historical and Forcasted Enplanements ,000 (Mil.) 3,500 3,000 2,500 2,000 1,500 1,

9 Example: Continued Enplaned Passengers by Carrier ,500 3,000 2,500 2,000 1,500 1, Others Air Canada Cape Air Independent Spirit Continental American Northwest United Delta US Airways Southwest 8

10 Example: Continued National Market CY 2004 Enterprise 35% Vangard (Alamo and National) 10% Budget 6% Avis 13% Thrifty 4% Dollar 5% Hertz 20% Other 7% Airport CY 2004 Budget 16% Vangard (Alamo and National) 14% Enterprise 8% Top 100 Airports CY 2004 Vangard (Alamo and National) 21% Budget 10% Avis 20% Hertz 28% Enterprise 5% Thrifty 5% Other 2% Dollar 9% Avis 23% Thrifty 7% Hertz 25% Other 2% Dollar 5% 9

11 Example: Continued 10

12 Conclusion Reviewed about a dozen transactions Investment grade fundamentals Structure determines rating Future: More reliance/involvement from the rental car companies Contingent rent Operate the consolidated facility CFC rates: around $4 per day (markets differ) 11

13 Fitch s Airport Rating Team San Francisco Chicago New York Jessica Soltz Rudd Senior Director Jessica.soltzrudd@fitchratings.com Peter Stettler Senior Director Peter.stettler@fitchratings.com Corey Modeste Associate Director Corey.modeste@fitchratings.com Jesse Ortega Analyst Jesse.ortega@fitchratings.com 12

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