OREANDA-NEWS. (This is an amended version of a press release originally issued Sept. 14, 2016, it corrects the rating for the subordinate bonds in the headline.)

Fitch Ratings has assigned a 'AA-' rating to the Greater Orlando Aviation Authority (GOAA, or the Authority), Florida's $196 million in Airport Facilities Revenue Bonds series 2016A and 2016B, and $40 million of Airport Facilities Taxable Refunding Revenue Bonds series 2016C. Fitch has also affirmed at 'AA-' the rating on $873 million in outstanding senior lien Airport Facilities Revenue Bonds and has affirmed at 'A+' the $63 million in outstanding subordinate lien Airport Facilities Revenue Bonds. The Rating Outlook on all bonds is Stable.

GOAA also has $52 million in outstanding senior parity bank loans series 2013A and 2013B; $160 million of parity subordinate LOCs and $53 million Florida Department of Transportation Joint Participation Agreement that is on parity with the subordinate lien bonds. These parity obligations are not rated by Fitch.

KEY RATING DRIVERS

The rating reflects the airport's position as a leading origination and destination (O&D) market, with a strong traffic base of nearly 19 million enplanements and a diverse carrier mix. GOAA benefits from a conservative debt structure, low airline costs, a strong liquidity position and low leverage of 2x, as well as healthy debt service coverage ratios. GOAA's capital program and financial plan through 2023 is substantial in size at an estimated $3 billion with partial funding from anticipated additional borrowings on two lien levels. The lower rating for the subordinate lien reflects its junior claim to airport revenues, coupled with lower covenant levels.

Revenue Risk - Volume: Stronger

Stable Traffic Levels With Diverse Carrier Mix: The airport's high level of O&D traffic at 95% of 18.8 million enplanements has provided stable performance in recent years. Enplanements are influenced by tourism and leisure, showing modest growth over the last five years, with more robust growth in the past year. The airport benefits from a well-diversified mix of carriers, with the largest carrier (Southwest, rated BBB+/ Stable Outlook) representing approximately 27% of enplanements. International enplanements have recently shown strong growth, increasing 16.7% in fiscal 2015, and up an additional 15.9% through June 2016.

Revenue Risk - Price: Stronger

Competitive Cost Structure: The airport has historically maintained a relatively low airline cost structure, with cost per enplaned passenger (CPE) at $4.50 in fiscal 2015. The Authority's CPE will rise to the $10 range as borrowings come online for capital improvements; however, these levels remain competitive for a large hub airport. Since 2013, GOAA has been setting rates by resolution but applying a hybrid compensatory rate-making methodology for use of terminal facilities and a residual rate-making methodology for the airfield.

Participating carriers (representing approximately 95% of passenger traffic under the current agreement expiring September 2016) are entitled to net revenue sharing. A new three-year agreement was recently signed, effective October 2016-September 2019, and is largely the same as the prior agreement, with some modest modification to revenue sharing and ratemaking.

Infrastructure Development/Renewal: Midrange

Capital Program Expanded: The 2016 - 2023 capital improvement plan (CIP) currently totals $3.0 billion. Major projects include improvements to the north terminal complex and airfield, South APM Project, and the $1.8 billion South Terminal Project, which seeks to meet long-term domestic and international passenger growth for the airport. The full CIP through 2023 is expected to be 68% debt-funded (includes prior and future senior and subordinate lien general airport revenues bonds and debt paid with passenger facility charges (PFCs)), while grants, pay-go PFCs, and airport funds will cover remaining costs.

Debt Structure: Stronger (Sr); Midrange (Sub)

Conservative Debt Structure: Senior lien debt benefits from all fixed-rate debt and a manageable amortization profile; the subordinate lien debt also amortizes, though has a junior claim to airport revenues. Debt service on existing obligations declines after 2021. New debt for capital improvements is expected to result in an increase in annual obligations over the next five years, followed by flat to declining annual debt service. Both senior and subordinate lien covenants and reserve requirements are typical for an airport credit. GOAA is in the process of amending its bond resolution via consent amendment, including revising the PFC use to become a direct offset to debt service versus pledged revenue at 125% of annual PFC-applied debt service. These amendments, which should come into effect in fiscal 2018, do not impact the credit of the GOAA bonds.

Financial Profile: The airport currently has stable financial operations drawing from diverse sources of operating revenues, adequate senior lien debt coverage at 2.15x in 2015, and relatively low overall leverage at approximately 2.0x net debt to CFADS. To the extent the full financing plan moves forward, with issuance of senior and subordinate bonds, overall leverage may rise to the 6x range and total debt coverage may narrow down to the 1.2x level. These weaker metrics could pressure the Authority's ratings. Strong liquidity is noted with 658 days cash on hand based on cash reserves through June 2016 and 2016 budgeted expenses

Peer Analysis: GOAA's peers include other south Florida airports with similar market characteristics, such as Tampa Hillsborough County (rated 'AA-'/'A+'/Stable Outlook) and Broward County Fort Lauderdale (rated 'A'/Positive Outlook), with GOAA's higher rating reflecting a stronger liquidity position, lower leverage, and stronger all-in coverage metrics.

FACT Tool: U. S. Airports (Opens in an Excel worksheet)

RATING SENSITIVITIES

Negative: Unexpected volatility in airport traffic operations resulting in erosion of the airport's current strong financial position, or unanticipated upward modifications to the capital and financing plans that further elevate borrowing requirements could result in negative rating pressure.

Positive: Given the airport's strong rating and underlying leisure market, upward rating movement is unlikely.

SUMMARY OF CREDIT

The series 2016A and 2016B Airport Facilities Revenue Bonds and series 2016C Airport Facilities Revenue Refunding Bonds are being issued on parity with existing senior lien obligations of GOAA. Together with other Authority funds, proceeds from the series 2016A and 2016B bonds will be used to (1) finance a portion of projects for the Loop Road, South APM, and Airside 1 and 3 development. Proceeds will also fund a deposit to the debt service reserve account, pay capitalized interest on the series 2016A bonds, repay certain draws on existing lines of credit, and pay costs of issuance. The bonds have an assumed all-in TIC of approximately 4.10%, and will amortize with generally level debt service through FY 2046. The series 2016C bonds (an estimated $40 million issuance) will be used to advance refund and redeem a portion of outstanding series 2009C and/or 2010A bonds, and to pay costs of issuance. GOAA is targeting savings of 7% of the refunding amount for the refunding transaction.

Orlando is the nation's sixth busiest O&D airport, serving 18.8 million enplaned passengers in fiscal 2015. O&D traffic makes up the bulk of the airport's enplanements at about 95%, benefiting from demand for local tourist destinations and convention business as well as the expanding local economy.

Fiscal 2015 enplanements were up 7.4% over the prior year, and were 3.2% above prior peak levels of 18.2 million seen in 2008. For the first 10 months of fiscal 2016, traffic has continued to show robust growth, increasing 10.2% over the same period in fiscal 2015. International enplanements continue to show strong growth, driven by new services to Dubai, South America, Europe, and Canada. International enplanements reached 2.4 million in 2015, or 16.7% over the year prior (follows increases of 5.1% in 2014 and 5.2% in 2013). International enplanements have increased a further 15.9% year to date. Service is now offered to 49 international destinations (29 year-round, 20 seasonal).

Total operating revenues increased by 7.9% to $427.9 million in fiscal 2015, building on 4.9% growth in fiscal 2014 and 3.8% revenue growth in fiscal 2013. Participating Airline Revenue increased 9.3%, reflecting the first full year of increased baggage system fees under the new rate resolution. Overall nonairline revenues increased 6.2%, with concession revenues growing more modestly at 1.5%. Food and beverage and general merchandise concession revenues increased proportionally with traffic levels (up 7.1%), but were offset by decreases in service concession and other terminal area revenues. Operating expenses increased by 12.5% in 2015 due to increases in operations and facilities and safety/security, largely linked to increased international traffic. Year to date operating revenues are up 8.0% for the first nine months of 2016 through June, while operating expenses are up 8.1%.

Debt service coverage levels for fiscal 2015 were strong at 2.15x for senior debt and 2.02x on all obligations, outperforming both 2014 results and Fitch's base case expectations. GOAA forecasts anticipate debt service coverage levels for fiscal 2016 will be 1.97x on the senior lien and 1.74x for all obligations. The Authority continues to maintain strong balance sheet flexibility with $453 million of unencumbered fund balances as of June 2016, equating to 658 days cash on hand based on fiscal 2016 budgeted operating expenses. CPE was low at $4.50 in 2015, in-line with $4.59 a year prior and reflecting lower terminal area rents and higher revenue sharing under the new agreement. During the five-year projection period, the Authority expects CPE to rise to the $10 level as more revenues are retained for use towards the CIP. Due to the desirability of Orlando's service area, Fitch does not view this increase as a material concern. Furthermore Fitch notes that cash reserves and CPE levels have been well managed historically, with the airport generating significant revenues from non-airline sources including concessions and PFCs.

Since November 2013, the Authority has set its rates and charges by resolution. The resolution, which has no expiration date, provides for a compensatory rate-making methodology for use of the terminal facilities, including certain activity based charges for use of the baggage system, and a residual rate-making methodology to establish landing fees for the use of the airfield. A rate agreement is also in effect which entitles participating airlines to share in certain revenues remaining after the payment of Authority debt service and operating expenses. The current rate agreement expires in September 2016. In August, GOAA approved the new agreement that becomes effective October 2016 and extends to September 2019. Terms are essentially the same as the existing regime, with modest refinements to the ratemaking and a modified revenue sharing arrangement. The only substantive change to ratemaking is to eliminate the low volume carrier discount for bag fees.

Revenue sharing has been modified such that GOAA retains the first $65 million in net remaining revenues; and 35% of the next $39 million in remaining revenues for FY 2017, $40 million for FY 2018, and $58 million for FY 2019. The next $10 million is given to the participating airlines, and any remaining amounts are split 35% GOAA, 65% Participating Airlines. In Fitch's view the airline cost recovery mechanisms together with non-airline revenue contributions provide solid operating cashflows with robust coverage levels.

GOAA's 2016 - 2023 capital improvement plan (CIP) totals $3.036 billion, a slight reduction from the prior plan ($3.084 billion) due to completion and deferral of certain projects. Major projects include: $427 million for the South APM Project, $703 million for the north terminal complex and airfield, $1.8 billion for the South Terminal Complex, and $106 million for other projects. The plan is expected to be 68% debt funded (including 24% funded with senior GARBs (prior and future); 16% with sub GARBs; and 28% with PFC backed debt (prior and future)); 12% with PFC paygo, and 20% other funds (grants, GOAA funds, and other funds).

GOAA's forecast incorporates the effects of the full capital program, including an additional $578 million in senior GARBs, $647 million in PFC backed debt, and $482 in additional subordinate GARBs. The forecast assumes average enplanement growth of 3.1% for the 2015 - 2023 period (9.4% increase in 2016 and 2.0% - 2.5% annual growth thereafter). Resulting senior coverage is 1.8x or better, and all in coverage of 1.4x or better; total leverage rises to 6x net debt/CFADS. Fitch viewed these assumptions as reasonable, and adopted GOAA's case as it base case. The rating case models a recessionary enplanement drop of 8% in the 2019 - 2020 period as the South Terminal comes online. Even with the inclusion of substantial CIP-related borrowing, Fitch views the financial profile as stable, with senior coverage remaining above 1.5x in the rating case, and all in coverages remaining 1.2x or better. Leverage increases to nearly 7x in the rating case, but would be expected to decrease as the new debt amortizes. CPE rises to the $11 range, still viewed as manageable for the traffic profile of the airport. Depending on the traffic and revenue outlook, the lower metrics under the rating case, if realized, could pressure the authority ratings.