DBRS Confirms Aéroports de Montréal at A (high), Stable

DBRS Limited (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, successful completion of the expansion of the international jetty and prudent management of operating expenses.

Passenger traffic in 2015 grew by 4.6%, surpassing ADM’s expectations. Excluding Airport Improvement Fees, aeronautical revenue increased by 6.6%. Total revenue increased by 5.4% with real estate and retail activities contributing to 41% of this increase. Operating expenses increased by a modest 0.2%, attributable to higher professional fees and information technology-related costs, which were partially offset by reduced energy costs, a reduction in payments in lieu of taxes and a 0.9% decrease in salaries and benefits. As a result, the Authority recorded an operating surplus of $19.8 million. EBITDA as calculated by DBRS increased by 11.6% while debt service payments increased by 6.2%, collectively resulting in a slightly improved debt service coverage ratio (DSCR) of 2.2 times (x). With the $200 million new Series M Bonds issued in June 2015, the total debt per enplaned passenger increased to $233 by the end of 2015.

For 2016, the Authority expects EBITDA to increase by 0.9%, backed by a 3.3% projected growth in passenger traffic, limited increases in rates and charges and continued growth in non-aeronautical revenues. For Q1 2016, ADM set a new record with 3.9 million passengers, up by 5.0% over Q1 2015 and exceeding anticipations. EBITDA totalled $57.1 million, an increase of $3.8 million or 7.1% over the corresponding period in 2015.

Infrastructure spending in 2016 is expected to be approximately $230 million, which includes maintenance and expansion. For 2016, remaining development works include: non-passenger screening vehicles checkpoints; holding pad rehabilitation and expansion; and runway rehabilitation at Mirabel. Over the next four years (2017 to 2020), annual capital expenditures are projected to gradually step down. As a result, the debt per enplaned passenger is expected to peak in 2017 at approximately $233 and then slowly reduce until 2020, with the DSCR expected to range between 2.3x and 2.4x, both of 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 (June 2016), which can be found on our website under Methodologies.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

The full report providing additional analytical detail is available by clicking on the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.