Fitch Affirms Miami Intermodal Center TIFIA Loan at 'A'; Outlook Stable
The rating reflects the Miami International Airport's (MIA) stable deplanement base of 20 million that has contributed to strong transaction day growth since the opening of the facility and outperformance in CFC collections. Fitch expects favorable coverage and liquidity ratios over the remaining life of the project loan and repayment 20 years ahead of maturity. Fitch - calculated rating case average PLCR through repayment is 1.75x, supportive of the rating. The rating affirmation reflects continued strong operating performance, the strength of the TIFIA loan structure that provides ample cashflow cushion and rapid amortization, and favorable debt service repayment flexibility relative to peers. The facility also benefits from the highest number of transaction days among peers.
KEY RATING DRIVERS
Strong Rental Car Market: MIA (rated 'A'/Outlook Stable) is a well-positioned, leading international gateway airport that supports a sizable rental car market to serve both arriving domestic and international passengers, with a building Latin American market. With rental car transaction days growth flat in fiscal 2015 and experiencing a dip in fiscal 2016 YTD, traffic growth appears to be stabilizing, following seven straight years of growth since the inception of the MIC. The rental car market is well diversified with 16 participating companies, with Alamo as the largest contributor to customer facility charge (CFC) revenues, representing roughly a quarter of total collections.
Supportive Revenue Framework: Based on existing transaction levels, project loans can be repaid solely from CFC payments. Contractually permitted, in October 2015 the CFC rate increased to $4.85 per day from $4.60 per day. Loan documents stipulate that CFCs are eligible to be increased by $0.25 every 5th year. To the extent CFCs are insufficient, the rental car companies are obligated to pay contingent rent to support a minimum 1.30x project life coverage ratio (PLCR).
Flexible Repayment; Early Amortization: The TIFIA loan structure focuses on ultimate recovery by FY2044 by sizing amortization payments to a percentage of available funds. Even under a conservative rating case scenario, current financial forecasts indicate full repayment by FY2024.
Improving Financial Profile: The project has experienced a steady increase in pledged CFCs allowing for favorable financial ratios over the remaining life of the project loan, as well as significantly earlier debt repayment. Fitch-calculated PLCR, which deducts reserve balances from outstanding debt, was 2.1x in fiscal 2015. Leverage is on par with similarly rated peers with net debt to CFADS of 4.4x. Reserves remain robust, including the project's operating reserve fund, secondary reserve fund, and debt service reserve fund, at a combined level in excess of $70 million.
Peers: The Miami airport consolidated rent-a-car facility maintains the highest level of transaction days relative to its peers. Closest peers are Atlanta (rated 'A-'/Stable Outlook by Fitch) and Charlotte (rated 'A'/Stable Outlook), which both have similar levels of project cost and similar airport profiles.
Negative: A sustained significant reduction in rental car activity in the range of 10 - 20% or more from current levels due to deplanement trends.
Negative: Operational or cash flow underperformance that leads to a potential reliance on contingent rent from rental car companies to support loan payments.
Positive: Continued strength of MIA air traffic performance in conjunction with positive rental car transaction trends and sustained outperformance in terms of CFC collections.
SUMMARY OF CREDIT
Following steady volume growth since the opening of the MIC, fiscal year 2015 rental car transaction days tapered ending slightly below base case expectations and fiscal 2016 YTD down 1.9%. Due to softening of deplanements at MIA, particularly with a reduction in international traffic from South America, sponsor forecasts have adjusted near-term traffic projections downward by about 1%, but continue to forecast steady growth in the mid-to-long term. Annual transaction days are north of 10 million, highest among peers. Rental car facility mix remains well diversified with 16 operators, the largest of which remain Alamo and Hertz with 30% and 18% of market share, respectively.
CFC revenue collection increased 1% in fiscal 2015 and has increased 3.4% to $48 million in fiscal 2016 YTD, due to a contractual increase in the CFC rate to $4.85 from $4.60 in October 2015, despite the decline in rental car transaction days. Rental car facility O&M performed under budget in fiscal 2015 and on budget in fiscal 2016 at $5.2 million. Increased O&M is forecasted approximately every five years as part of a detailed cost replacement analysis for maintenance and repairs.
The five-year cap limiting CFC exposure to its share of MIA Mover O&M at 50% expires at the end of fiscal 2016. CFCs are now contractually obligated to cover the RCF proportionate share of ridership, which has exceeded Fitch rating case expectations, at 82%. Despite the budgeted increase in MIA Mover related expenses to $5.6 million in fiscal 2017 from $2.2 million in fiscal 2015 and $2.5 million in fiscal 2016 YTD, operating margin remains very healthy averaging 75% through the expected payoff date.
Fitch's base case projects 1% annual growth in transaction days, rental car facility O&M growth at 3.5%, in years without budgeted one-time maintenance increases, and percentage of MIA Mover O&M at 82%. Under these conditions, Fitch-calculated PLCR averages 2.35x with the expected payoff date in 2024, one year later than sponsor forecasts and prior base case expectations.
Fitch's rating case assumes an aggregate 10% decrease in transaction days sensitivity applied through fiscal 2018, followed by a full recovery. Rental car facility O&M is elevated 50bp above base case, and the percentage of MIA Mover O&M is increased to 90%. Under this scenario, Fitch-calculated PLCR averages 1.75x with the expected payoff date remaining in 2024, 20 years ahead of final maturity in 2044. In either scenario, coverage levels and liquidity remain consistent with the 'A' rating.
The TIFIA loans consist of two borrowings totalling $270 million with a scheduled final maturity in 2044. The loans represent a highly structured financing with a cash waterfall managed by a trustee. There is no pre-set amortization schedule, a feature that limits default risk to the final maturity date.
MIC serves as a hub for transit, rental cars, taxis and shuttle services for Miami International Airport. The project was developed by FDOT in partnership with Miami Dade County, the federal Department of Transport, Miami Dade County Expressway Authority and South Florida Regional Transportation Authority. The RCF portion of the project opened for business on July 13, 2010. Miami-Dade County's aviation department (MDAD) operates the RCF.