DBRS Confirms Aéroports de Montréal at A (high)

DBRS has today confirmed the Issuer Rating of A (high) and the rating of A (high) assigned to the Revenue Bonds (the Bonds) of Aéroports de Montréal (ADM or the Authority). Both trends are Stable, supported by healthy operating results, manageable debt levels, well-diversified revenue sources and prudent management of operating expenses. The recent decision to dismantle the Mirabel terminal building is also viewed as beneficial to the credit, as it removes the need for ongoing maintenance capital and creates a potential revenue opportunity from alternative uses of the land.

Passenger traffic in 2013 grew by 2.1%, which surpassed the expected 1.4% but still lagged some other airport authorities rated by DBRS. Such traffic growth, combined with a modest increase in rates and charges, led to an aeronautical revenue increase of 4.2%, excluding the Airport Improvement Fees (AIF). Total revenue increased by 2.6% with the AIF and non-aeronautical operations included. Operating expenses increased by a modest 0.9%, attributable to higher costs in snow removal and de-icing materials, heating and electricity, partially offset by savings achieved in professional service costs. EBITDA as calculated by DBRS increased by 4.3%. Interest expenses also increased by 4.2% due to the Series K revenue bond issued in late 2012. Correspondingly, DSCR remained at 2.0 times (x). Increased passenger traffic led to a slight reduction in debt per enplaned passenger, from $236 to $230.

For 2014, the Authority expects EBITDA to increase by 3.3%, reflective of the anticipated 2% growth in passenger traffic, 2% to 3% increase in rates and charges, and a 4.3% growth of non-aeronautical revenues. ADM expects the DSCR to remain within the 1.7x to 2.0x range over the next few years and debt per enplaned passenger to peak in 2015 at roughly $240, which DBRS nevertheless views as suitable for the rating.

Annual infrastructure spending in 2014 is expected to total $230 million. ADM intends to address these needs by way of surplus cash, although it expects these balances to be depleted by October 2014. At that time, the Authority plans to gradually draw down on its bank line to fund capital expenditures, while still leaving a portion undrawn as a measure of liquidity to handle any unexpected shocks. Over the next five years (2015-2019), the annual capital expenditure is expected to total between $120 million and $190 million. To support these cash outlays, ADM intends to conduct capital market issuances in 2015 and 2019 and use its bank line to bridge temporary funding gaps.

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.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

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