DBRS Morningstar Places Edmonton Regional Airports Authority Under Review with Negative Implications

DBRS Limited (DBRS Morningstar) placed Edmonton Regional Airports Authority’s (ERAA or the Authority) Issuer Rating and Revenue Bonds, Series A rating of A (High) Under Review with Negative Implications. The ration action is caused by the impacts of the Coronavirus Disease (COVID-19) and actions to control the spread, which have led to a high level of traffic drop in recent weeks; international flights to Europe have been stopped, and overall traffic volumes are currently approximately less than 10% of previous levels. For the calendar year 2020, the Authority is forecasting a gradual increase of traffic volumes after a period of negligible traffic for three months, leading to overall traffic of 3.6 million passengers for 2020, approximately 44% of pre-coronavirus forecasts. DBRS Morningstar considers the exposure of the local economy to the energy sector and oil price shocks, which could have a negative impact on medium-term passenger forecasts.

DBRS Morningstar notes that adequate liquidity for servicing debt payments in the near term is provided by the six-month debt service reserve account, cash balances, the waiver of ground-lease payments by the Government of Canada (rated AAA with a Stable trend by DBRS Morningstar) until December 31, 2020, and other savings in operational costs initiated by the Authority. The Authority is in discussions for other measures to preserve liquidity for the year. DBRS Morningstar notes that there are no refinancing requirements in the medium term and federal support could be provided, which could help manage the liquidity.

DBRS Morningstar expects to resolve the Under Review status after considering the outcome of discussions with financiers and governmental agencies, the impact of coronavirus on long-term forecasts of passenger volumes on account of the oil price declines, and overall economic situation.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology is Rating Canadian Airport Authorities, which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

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 under Related Documents or by contacting us at [email protected].

This rating was not initiated at the request of the rated entity.

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

This is an unsolicited credit rating.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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