DBRS Rates Aéroports de Montréal Revenue Bonds at A (high), Stable Trend

DBRS Limited (DBRS) has today assigned a provisional rating of A (high) with a Stable trend to the $200 million Series M Revenue Bonds, expected to be issued by Aéroports de Montréal (ADM or the Authority) on June 12, 2015, and confirmed the Issuer Rating and the ratings assigned to ADM’s pre-existing Revenue Bonds at A (high) with a Stable trend. The Series M Revenue Bonds will be direct obligations of ADM, ranking pari passu with all other indebtedness secured pursuant to its master Trust Indenture. Bond proceeds will be used to fund ADM’s capital program and its general corporate activities. The Bonds will be non-amortizing, pay interest semi-annually, and will mature on June 12, 2045. The ratings are supported by healthy operating results, manageable debt levels, well-diversified revenue sources and prudent management of operating expenses.

Passenger traffic in 2014 grew by 5.3%, surpassing ADM’s expectation of 2.0%. Aeronautical revenue increased by 2.9%, excluding the Airport Improvement Fees (AIF). Total revenue increased by 3.9%, with retail activities contributing to half of this increase. Operating expenses increased by a modest 2.5%, attributable to salary increases, IT-related costs, the acquisition of AeroParc Vinci parking in December 2013, partially offset by a decrease in AIF collection rate from 5.0% to 4.0%. The balance between revenue and expenses showed a deficit of $4.4 million, as a result of a one-time $16 million impairment charge recorded for the dismantling of the old Mirabel terminal building. EBITDA as calculated by DBRS increased by 6.4%, with interest expenses roughly maintained at the same level, resulting in a slightly improved DSCR at 2.1 times (x). With no new debt issued in 2014, the increased passenger traffic led to a reduced debt per enplaned passenger of $218 at the end of 2014.

For 2015, the Authority expects EBITDA to increase by 2.3%, backed by modest passenger traffic growth, limited increase in rates and charges, and continuous growth of non-aeronautical revenues. Annual infrastructure spending in 2015 is planned at approximately $259 million and expected to be funded through cash surpluses and the proceeds of the series M bond issuance. Development works will continue to focus on the international jetty expansion, while other major projects include expansion of commercial areas and VIP lounges, expansion of delivery bays and warehousing space and relocation of restaurant supporting spaces. Over the next four years (2016–2019), annual capital expenditure is planned to range between $87 million and $173 million. ADM plans to fund these cash outlays mainly with internally generated cash, supplemented by its bank line to bridge temporary funding gaps. As a result, the debt per enplaned passenger is expected to peak in 2015 at approximately $240 and then slowly reduce over the next four years, with the DSCR expected to range between 2.1x and 2.4x, which DBRS views as suitable for the rating.

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.

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