DBRS Rates New Debt of NAV CANADA at AA (low)

DBRS has today assigned a rating of AA (low) with a Stable trend to the $350 million General Obligation Note Series MTN 2013-1 (the Notes) issue of NAV CANADA (the Company). The Notes will have a five-year bullet maturity, pay a fixed rate interest of 1.949% and will rank pari passu with all other subordinated obligations of the Company. The rating is consistent with the ratings previously assigned by DBRS to the Company’s outstanding General Obligation Debt. The AA rating and Stable trend assigned to NAV CANADA’s Senior Debt are also unchanged. Net proceeds are expected to be used to repay $250 million in subordinated debt maturing April 29, 2013 (Series MTN 2010-1), and for general corporate purposes.

Since DBRS last confirmed the Company’s ratings on September 14, 2012, NAV CANADA released its second quarter results for F2013. For the first six months of F2013, traffic levels decreased 2.4% on a year-over-year basis and were down 3.3% during the second quarter. H1 2013 revenues fell by 1.3%, with other revenues partially offsetting the drop in revenues from customer service charges. Operating expenses for the period were marginally lower, as increases in technical services and salaries and benefits were essentially offset by lower pension expenses and a decrease in property taxes and utilities costs. Excluding rate stabilization and one-time items, H1 2013 EBITDA decreased 6.1%, and when combined with lower interest expenses, resulted in a debt service coverage ratio (DSCR) of 1.8 times. The Company is predicting that traffic will decline by 1.7% in F2013, which DBRS views as a reasonable assumption given the lukewarm global economic environment. However, DBRS notes that the weakening experienced in the second fiscal quarter places greater emphasis on the busy summer period in order to achieve forecasted traffic levels.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodology is Rating Canadian Airport Authorities, which can be found on our website under Methodologies.