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Fitch downgrades Airport Authority bonds

Credit agency improves outlook on airport despite concerns about revenue volatility.

April 26, 2012|By Maria Hsin, maria.hsin@latimes.com
  • Fitch dropped Burbank-Glendale-Pasadena Airport Authority bond ratings to A  from AA- this week.
Fitch dropped Burbank-Glendale-Pasadena Airport Authority… (Tim Berger / Staff…)

Credit agency Fitch this week downgraded its rating on Burbank-Glendale-Pasadena Airport Authority bonds, but noted the airport is in healthy financial shape overall.

The agency dropped its rating to A+ from AA- on $53.5 million worth of outstanding 2005 bonds and assigned that same rating to $82.7 million of new bonds the airport plans to float to build a transit center.

In a release Tuesday Fitch gave the airport a “stable” outlook, up from “rating watch negative.”

Fitch listed several reasons for the rating downgrade, including “the volatile nature of operating revenues, which are influenced by recently weakened traffic performance.”

Bob Hope Airport has been battling declining passenger numbers and revenues the past four years and suffered another blow when American Airlines pulled out of Burbank in February.

Fitch believes there is a low probability for a meaningful traffic rebound over the next several years due to the presence of competing airports nearby.

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The downgrade also reflects the fact that Bob Hope Airport will increase its long-term debt by building the new regional intermodal transportation center, or RITC.

The center — a hub for commuter bus and rail services, rental car agencies and airport passengers — is estimated to cost about $109 million. Airport officials this week agreed to seek roughly $82.7 million in bonds to help cover the cost.

Fitch also said the airport is exposed to risk because its fortunes rest strongly on one commercial carrier, Southwest Airlines.

There was good news in the report as Fitch determined the airport has “notably strong financial metrics, characterized by extremely healthy liquidity levels and low leverage.”

The airport maintains more than two times unrestricted liquidity to outstanding, long-term debt, Fitch reported. Leverage levels will likely remain low over the next several years even when factoring in a proposed borrowing for the RITC project, Fitch estimated.

Airport spokesman Victor Gill said airport officials are not in a position to comment on the ratings and that they anticipate the sale of the RITC bonds later this year will go smoothly.

The ratings “are what they are,” Gill said. “It’s a really a question of what the investment community thinks of [the bonds] when we go to market for sale. We anticipate a viable issue, of course.”

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