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Burlington (City of) VT -- Moody's assigns Baa2 to Burlington (City of) VT Airport Enterprise's Airport Revenue Refunding Bonds, Series 2021A (taxable); stable outlook

·15 min read

Rating Action: Moody's assigns Baa2 to Burlington (City of) VT Airport Enterprise's Airport Revenue Refunding Bonds, Series 2021A (taxable); stable outlookGlobal Credit Research - 22 Feb 2021New York, February 22, 2021 -- Moody's Investors Service, ("Moody's") has assigned a Baa2 rating to the Burlington (City of) VT Airport Enterprise's $5.385 million Airport Revenue Refunding Bonds, Series 2021A (taxable). The outlook is stable. Burlington Airport has $26.1 million of Series 2012A and 2014A bonds outstanding, as well as $11.1 million of Revenue Anticipation Notes issued by the City of Burlington.RATINGS RATIONALEThe Baa2 rating reflects the continued stability in liquidity and debt service coverage, combined with a strengthened cost recovery framework following the adoption of a multi-year airline agreement that is residual in nature and provides for a 1.50x debt service coverage ratio (DSCR) and a floor of 200 days cash on hand. The credit profile will remain supported by limited competition for Burlington's primary O&D passenger base, a stable cost profile, and a relatively low debt burden. The airport anticipates no new debt to fund capital projects, and has a manageable planned capital investment program. We expect the service area's long-term growth prospects to remain modest, given the City of Burlington's status as a regional economic center with institutional anchors represented by government, health care and higher education will sustain a solid level of air travel demand under normal circumstances, which the airport is well-positioned to serve.Moreover, the airport is well-positioned to address challenges posed by the coronavirus pandemic, which has impacted airport operations and has created economic uncertainty. The airline has seen material declines in enplanements since the onset of the pandemic, and considerable uncertainty remains over the pace of recovery. The airport is supported by adequate levels of liquidity, totaling $12 million in unrestricted cash (including RAN proceeds), as well as nearly $4 million of CARES Act funds available to be deployed in the current fiscal year. The airport also anticipates another $4 million in federal funds.The airport is further supported by the 2021A refunding, which will materially reduce debt service obligations for fiscal years 2022 and 2023, creating financial flexibility given the uncertainty surrounding the pace of recovery in enplanements, unexpected pressures stemming from the coronavirus pandemic, or broader economic uncertainty. The new debt service structure will have no debt service for fiscal year 2022, modest debt service of approximately $500,000 for 2023, after which debt service will remain level at $3.8 million through fiscal year 2031. Moody's expects debt service to remain supported by the extension or renewal of the existing airline agreement under similar terms and with no material changes to participants. The existing airline agreement is set to expire on June 30th 2021.RATING OUTLOOKThe stable outlook reflects our expectation for stability in core financial metrics, namely DSCRs and liquidity, and a steady improvement in enplanements. We expect the airport will maintain net revenue DSCRs close to 1.5x, and liquidity above 200 days cash on hand. The airport is well positioned to sustain its credit profile over the next 12-18 months due to the cost recovery framework provided by its airline agreement, adequate liquidity levels, favorable debt service schedule, manageable cost structure that supports cost per enplanement (CPE), and no new borrowing.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING- Enplanement and air service growth that markedly improves the airport's competitive position in the region- Liquidity sustained above 600 days- DSCRs sustained above 2.0xFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING- Prolonged downturn in enplanements- Liquidity, measured by days cash on hand, below 200 days- DSCRs below 1.5xLEGAL SECURITYThe bonds are special obligations of the city payable solely from airport net revenues. The pledge of revenues includes allowable PFCs and industrial park revenues associated with designated projects. The rate covenant is 1.25x annual debt service and the additional bonds test is equal to 1.25x maximum annual debt service (MADS). The airport has a cash-funded debt service reserve fund sized at MADS.USE OF PROCEEDSSeries 2021A proceeds will be used to advance refund the Refunded Series 2012A Bonds and Refunded Series 2014A Bonds, capitalize interest payments, fund the 2021A debt service reserve fund (though this may be a surety), and pay the costs of the Series 2021A issuance.PROFILEBurlington International Airport (BTV) is a small hub O&D airport located four miles east of downtown Burlington.The airport is located on 1,100 acres and includes a 130,000 square foot main terminal building with 15 gates, 2 runways and a 2,700-stall parking garage connected to the terminal by an enclosed walkway. Other airport facilities include 220,251 square feet of building space rented to a fixed-base operator, as well as an industrial park encompassing over 80 acres with plans for future development. Vermont Army National Guard and Air National Guard are located at the airport, and the air national guard provides all Aircraft Rescue and Fire Fighting (ARFF) services, from fleet to personnel, for the airport, a savings of $2.5 million annually.BTV is the primary commercial service airport for the Burlington-South Burlington Metropolitan Statistical Area. The airport mostly serves passengers in and around the MSA, its primary catchment area, but it also draws passengers from northern Vermont, New Hampshire, northeastern New York and southern Quebec. BTV estimates that approximately 15-25% of enplaned passengers are Canadian residents.METHODOLOGYThe principal methodology used in this rating was Publicly Managed Airports and Related Issuers published in March 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1140469. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.The rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. David Kamran Lead Analyst Project Finance Moody's Investors Service, Inc. 7 World Trade Center 250 Greenwich Street New York 10007 US JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Kurt Krummenacker Additional Contact Project Finance JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. 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