DBRS Confirms Ratings of Vancouver Airport Authority at AA (low), Stable trend

DBRS Limited (DBRS) has today confirmed the Vancouver Airport Authority’s (VAA or the Authority) Issuer Rating and Senior Debentures at AA (low), both with Stable trends. The rating confirmations reflect the Authority’s continued solid financial performance and relatively low debt burden, tempered by a softening domestic and global economic climate.

Enplaned passenger traffic rose by 7.7% in 2014, faster than other DBRS-rated Canadian airports. EBITDA grew 2.8% in 2014, benefiting from a 10.8% increase in non-aeronautical revenue and 3.4% growth in landing and terminal fee revenues. During Q1 2015, passenger volume increased by 6.0% relative to the same period a year ago. The Authority anticipates that total traffic growth rate will reach 4.2% by the end of 2015 with modest EBITDA gains primarily supported by non-aeronautical revenue streams. During 2013 and 2014, total debt including deferred rent decreased at a pace of 0.3% per year to $550.3 million by the end of 2014, or $57 per enplaned passenger, owing to slower-than-anticipated capital spending. The modest improvement in EBITDA, coupled with lower than expected debt levels, led to an improved interest coverage ratio (ICR) of 7.9 times. The $200 million Series E bonds will mature on November 14, 2015, and the Authority is currently considering refinancing options.

To accommodate envisioned traffic levels, the Authority is ramping up its capital program, and anticipates approximately $2 billion of spending between 2015 and 2020. As a result, debt is expected to rise, peaking at $1.42 billion by 2020, or an estimated $122 per enplaned passenger, a level still considered appropriate but potentially testing the upper bounds of the rating, particularly should traffic fail to materialize or debt increase at a faster pace. Nonetheless, DBRS draws comfort from the Authority’s ability to control its capital spending through an established annual capital project review process, its ability to raise the Airport Improvement Fee (AIF) if necessary, and the fact that the even at such levels, financial ratios should remain favourable compared to its DBRS-rated peers.

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.