DBRS Assigns Ratings of A (high) and R-1 (low), Stable, to the Greater Toronto Airports Authority

DBRS Limited (DBRS) has today assigned a provisional Issuer Rating of A (high) and a provisional Commercial Paper rating of R-1 (low) to Greater Toronto Airports Authority (GTAA or the Authority). All trends are Stable. The ratings are reflective of the strong traffic growth the Authority has experienced in recent years as well as its solid financial performance, including significant balance sheet de-leveraging.

GTAA’s passenger growth has been strong over the past three years, but was particularly robust in 2016, reaching 44.3 million passengers, up 8.0% over 2015. The Authority experienced its highest growth rate in 12 years, primarily helped by the international and transborder segments. Cargo volumes also saw a resurgence with growth of 8.8% in 2016, bringing total volume to 472.3 thousand metric tonnes, the highest level in over a decade. Aeronautical fees were unchanged during the year, but the increased traffic resulted in revenues growing by 7.1% year over year (YOY) while operating expenses, as calculated by DBRS, grew 12.6%, yielding solid EBITDA improvement of 2.5% in 2016 over 2015. For the year, aeronautical revenues increased 2.9% YOY while non-aeronautical revenues increased 7.3%. The positive trends of 2016 have continued into 2017. For Q1 2017, passenger traffic of 10.6 million was up 7.4% YOY and aircraft movements at 109,300 were up 2.7%. Passenger growth was driven by 9.6% growth YOY in international traffic, but domestic traffic was still good, growing by 3.5%. Revenues rose 5.4% YOY to $320.2 million and EBITDA improved by 2.6% to $155.3 million.

During the quarter, aeronautical revenues grew by 3.0% while non-aeronautical revenues grew at a slightly faster rate of 3.3%. Ongoing de-leveraging resulted in total year-end debt of $6.22 billion compared with $6.29 billion a year earlier. Correspondingly, the debt service coverage ratio, as calculated by DBRS, rose to 1.9 times (x) in 2016 from 1.7x in 2015 and debt per enplaned passenger improved to $281 in 2016 from $307 the year before.

DBRS notes that, at the end of 2016, reserves were $477 million compared with $500 million in 2015.

Supported by results for 2016 and Q1 2017, the Authority forecasts a declining debt burden, moderate capital expenditures as well as solid growth in traffic, revenues and EBITDA for 2017. DBRS believes these forecasts to be reasonable and supportive of the ratings. Continued improvement in credit metrics and, notably, the continued reduction in debt per enplaned passenger would contribute to greater creditworthiness; however, a marked slowdown in passenger traffic or a sustained deterioration of financial metrics could cause a revision of the trend.

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 principal methodology is Rating Canadian Airport Authorities, which can be found on dbrs.com under Methodologies.

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.