OREANDA-NEWS. Fitch Ratings has affirmed its 'A' rating on the city of Charlotte's approximately \\$58.2 million special purpose facility taxable revenue bonds (Consolidated Rental Car Facility Project bonds), issued on behalf of Charlotte Douglas International Airport (the airport, CLT). The Rating Outlook remains Stable.

The rating reflects sustained multi-year growth in transaction days due to the strength of CLT's sizeable origin and destination (O&D) market of more than 5 million enplaned passengers. The rating is further driven by a stable-to-increasing history of customer facility charge (CFC) collections and rental car revenues, as well as substantial debt service coverage ratios projected to remain above 2.0x.

KEY RATING DRIVERS
Stable Demand Profile: The consolidated rental car facility, or CONRAC, serves the sizeable Charlotte metropolitan region with historically over 2 million visiting O&D deplanements. Transaction days are up 8% over fiscal 2014, exceeding forecasts, and the five-year compound annual growth rate remains at a strong 5.5%.

High Degree of Rate-making Flexibility: The airport's current CFC rate of \\$4.00 is adequate to cover debt service obligations. The airport also maintains the ability to raise rates at its discretion, though further increases are not expected in the immediate future. Fitch views the current CFC rate as competitive across peers for a bond-financed car rental project. The airport may also levy contingent rent on the rental car companies.

Strong but Limited Security Package: The structure is underpinned by a first lien on CFC monies and, if needed, contingent rent, a closed loop of funds, and cash-funded project reserves.

Manageable Leverage: The project's leverage is below 5.0x and results in strong free cash flow and healthy debt service coverage ratios through the life of the debt, at or near 2.0x excluding the use of any rolling coverage and cash funded reserve accounts.

Peers: Fitch-rated peers include CONRACs at Miami Airport ('A-') and the Greater Orlando Aviation Authority (GOAA;'A') due to similar market share distribution and financial metrics, with GOAA and Charlotte benefitting from lower overall leverage.

RATING SENSITIVITIES
Negative: A considerable drop in rental car transactions in the range of 20%-30% could adversely affect pledged revenue and coverage levels absent an increase in the CFC rate;

Positive: Given the narrowness of the pledged revenue stream, the current rating is unlikely to migrate to a higher level.

SUMMARY OF CREDIT
Construction has been completed on the consolidated rental car facility (CONRAC), which comprises the first three levels of a seven-level parking garage that positions rental cars closer to the main airport terminal building.

The Charlotte Airport CONRAC facility benefits from a sizeable O&D enplanement market in excess of 5 million and the expansive number of markets served through the presence of the large American Airlines ('B+'/Outlook Stable) hub. Airport traffic trends continue to be favorable as O&D has grown by 3.1% and 2.0% in fiscal 2014 and 2015.

Though revenues are not yet fully available for fiscal 2015, given the continued strong growth in transaction days, fiscal 2015 revenues are expected to be in line with fiscal 2014 in which revenues grew 6.3% following growth of 1.1% in transaction days. Fiscal 2015 transaction days are up 8.0%.

Including a fully cash-funded coverage account, revenues available for debt service totalled approximately \\$10 million in fiscal 2014 leading to a debt service coverage ratio (DSCR) of 2.93x. Even under Fitch's base case projection of only modest traffic and rental car transaction day growth of 0.1% through fiscal 2017, DSCRs remain in the 2.3x range. In Fitch's rating and sensitivity cases, which assume a large near-term shock in rental car transaction days followed by modest recovery thereafter, DSCRs remain in the 2.0x range.

Fitch continues to note the limited nature of car rentals as the only revenue stream available to service debt as a limiting factor for the rating. Demand for car rentals is exposed to the variability of discretionary spending, more so during an economic downturn, which can affect both the number and duration of rental car contracts.

SECURITY

The series 2011 bonds are secured by a pledge of the CFC collections received or receivable by the city and, if necessary, any contingent rent paid by the rental car companies. In addition, the city has pledged the amounts on deposit in the CFC stabilization fund, rolling coverage fund, supplemental reserve fund, and debt service reserve fund, which combined currently total \\$15.7 million, or 2.2x maximum annual debt service payable through maturity.