Moody’s Investors Service announced Wednesday it has assigned provisional ‘Baa3’ ratings to Aerostar Airport Holdings, LLC’s $350 million of senior secured bonds. The outlook is stable. Bond proceeds will be used to partially fund the acquisition of a long-term lease to operate the Luis Muñoz Marin Airport.
“Upon review of final documentation, in the event that there are no material changes to the information reviewed to date, we would expect to assign a definitive rating of Baa3 to the bonds,” the agency said.
Bond proceeds will be used to partially fund the 40-year lease to operate the Carolina airport facility, an agreement that is currently under review by the Federal Aviation Administration.
Aerostar will secure the bond issue with a first priority interest in its leasehold of the LMM, as well as a mortgage of its equity and various project accounts, Moody’s said.
“The preliminary ‘Baa3’ rating reflects [LMM’s] dominant market position as the largest and closest airport to San Juan, as well as its high contribution of origin and destination traffic, lack of competing transportation options to Puerto Rico and significant certainty of aeronautical revenue under the Airline Use Agreement,” Moody’s noted.
“The rating further reflects expectations for weak demand growth for both inbound and outbound travel to [LMM], reflecting the sustained economic challenges of Puerto Rico, as well as expectations for low income growth in the U.S. mainland, [LMM’s] major originating market.
Moody’s said the outlook reflects expectations for stable traffic levels over the next few years, which, “in combination with the conservative capital structure, should allow for Aerostar to meet its debt service obligations even in a low enplanement growth environment.”