Fitch Ratings has affirmed the ‘BBB+’ rating on the City of Pensacola’s approximately $35.6 million in outstanding series 2008 airport capital improvement revenue bonds issued on behalf of Pensacola Gulf Coast Regional Airport. However, the rating outlook is negative for the second consecutive year because of the airport’s weak balance sheet liquidity and slightly above-average leverage. According to Fitch, the airport’s unrestricted cash balance position has historically been poor relative to its operating expenses, and for fiscal 2010 the airport only had 60 days cash on hand.
The question that needs to be asked is—did the old city council (Jack Nobles, Marty Donovan and crew) expand the airport and accrue debt more that its financial capacity?
According to Fitch Ratings: “With operating expense growth outpacing that of operating revenue, the airport’s debt service coverage has become increasingly dependent on PFC (Passenger Facility Charges) transfers to cover the eligible portion of the series 2008A debt service. Additionally, PGCRA must continue to use its capital fund balance to meet its rate covenant test of 1.25x coverage. PGCRA’s debt service coverage ratio (DSCR) for fiscal 2010 was 2.15x (including capital fund and PFC transfers) and 1.61x (including capital fund transfers only). While coverage is expected to be higher in fiscal 2011, coverage in fiscal 2012 onward could be stressed as debt service obligations increase by nearly $2 million. Fitch plans to continue to monitor DSCR and should coverage begin to decline, it could pressure the rating.” Read more on BusinessWire.com
Fitch Ratings gave the airport bonds a negative outlook in 2010, too (Read Reuters). The reasons for the negative outlook included the oil spill in the Gulf and the opening of the Panama City-Bay County International Airport.
In 2008 when the bonds were issued, Fitch rated them BBB+ because of “the airport’s role as the principal provider of air travel for the region, the stable nature of the regional economy and the presence of low-fare provider AirTran Airways (AirTran), which initiated service in 2001 and subsequently stimulated considerable air traffic growth, the modest capital needs at the airport, and low liquidity.” Read more.
My what a difference three years can make.
