The financial status of the Tulsa International Airport is stable in the opinion of Moody’s Investors Service which has assigned a new bond rating for the Tulsa Airports Improvements Trust. The improved rating is a result of growing flights in and out of the airport.
Moody’s assigned a Baa1 to the TAiT and its $19.7 million General Airport Revenue Bonds, Series 2018A. Moody’s said it willalso maintain the Baa1 rating on TAIT’s outstanding bonds because the outlook is stable. The Trust not only is responsible for the Tulsa International Airport but also the R-L Jones airport.
The Baa1 rating incorporates TAIT’s debt service coverage ratios (DSCRs) improving to nearly 1.4x over the near term after averaging around 1.1x in recent years.
The improved financial performance is supported by an uptick in enplanements due to increased service offerings and the service area’s regional economic recovery from a contraction in the energy industry. This is balanced against TAIT’s high leverage metrics; however, annual debt service requirements are declining, and the airport does not have any additional new money issuance plans at this time. In addition, the airport’s ability to make airline rate adjustments via an extraordinary coverage protection clause in the airline use and lease agreement provides bondholder support.
Moody’s explained the stable rating outlook is based on its expectation that the airport will have steady enplanement growth and no additional borrowing. The company further stated its outlook additionally incorporates the expectation that the airport will sign a new airline agreement in the coming months that retains extraordinary coverage protection as well as the ability to enact mid-year rate adjustments as necessary.
Here is how Moody’s looked at the airport’s bond rating:
FACTORS THAT COULD LEAD TO AN UPGRADE
– Enplanement growth at or above the US average for O&D airports
– Internal liquidity increases above the national median around 600 days cash on hand
– Net revenue DSCR increases to a sustained level above 1.4x including Passenger Facility Charges (PFCs)
FACTORS THAT COULD LEAD TO A DOWNGRADE
– Protracted trend of enplanement declines
– CPE increases to levels that are uncompetitive with peers
– Sustained decline in liquidity below 300 days cash on hand
The bonds are secured by a pledge of net revenues (gross revenues less operating expenses). PFC revenues of the airport system are separately defined as dedicated revenues and are included in gross revenues for determining compliance with the rate covenant and additional bonds test, but are not available to pay debt service on certain long-term debt of TAIT, including but not limited to the 2018A bonds.
USE OF PROCEEDS
Proceeds of the 2018A bonds will pay for the design, renovation, equipping and rehabilitation of the terminal building located at Tulsa International Airport. Terminal building rehabilitation projects include utility work, boiler replacement, roof replacement, relocation of airline ticket counters, asbestos abatement activities and related capital improvements. Bond proceeds also will pay capitalized interest, cost of issuance and fund the debt service reserve.
PROFILE
The TAIT operates, maintains, constructs, improves and/or leases both Tulsa International Airport and RL Jones Airport, which serve the City of Tulsa. TAIT and the City of Tulsa entered into an amended and restated long term lease agreement, effective January 1, 2014, whereby the City, acting through the Tulsa Airport Authority, assigned all airport system properties and equipment to the TAIT. The restated lease agreement created more autonomy for TAIT, but continued the same underlying lease arrangements with the City. Tulsa International Airport represents over 95% of TAIT operating revenues and is comprised of a central terminal and two concourses, three paved runways and over 3,700 parking spaces.