Sun, Feb 20, 2011
First-Ever Comparison Of Credit Ratings Between U.S. Airports
And Airlines
Airports Council International - North America (ACI-NA) has
released a white paper on the difference in credit ratings between
U.S. airports and airlines. This Industry White Paper, Credit
Ratings and Cash Reserves: How They Influence the Borrowing Costs
of Airports, was prepared by Ricondo & Associates, Inc., with
assistance from Piper Jaffray & Co. and Morgan Keegan &
Co., Inc., in consultation with the ACI-NA Finance Committee.
"Maintaining high credit ratings is very important to the
business viability of airports," said ACI-NA President Greg
Principato. "A strong credit rating not only provides a
reduction in borrowing costs but it also allows airports to
maintain access to the municipal bond market, which is the primary
funding source for airport capital projects."
The industry white paper released Thursday examined the
historical basis for the strong credit ratings of airports, the
difference in the credit ratings of airlines and airports, and the
costs and benefits to airports of attaining different credit rating
levels. Central to the debate is the different viewpoints regarding
the level of cash reserves and debt service coverage required to
maintain an airport's credit rating, and whether achieving such
high ratings places costs on the airlines that outweigh the
benefits.
The report concluded that while cash reserves are a significant
factor used by the credit rating agencies and factor into the
interest rates on bond issues, "their importance should not be
overstated...other factors such as the economic underpinnings of
the service area, market concentration, and future capital needs
being as, if not more, significant in assessing credit
quality."
The primary author of this White Paper, Peter Stettler, was
particularly well qualified to lead this effort. Prior to joining
Ricondo & Associates, Peter worked for over 10 years as Senior
Director of Public Finance at Fitch Rating, one of the top three
rating agencies. "The ACI-NA Finance Committee not only provides a
platform for members to exchange information on important issues
related to airport finance and performance benchmarking; the
Committee also produces quality products that benefit the entire
industry," said Principato. "The committee's involvement with this
white paper on credit ratings and cash reserves is yet another
testament to their importance to the aviation community."
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