OREANDA-NEWS. Fitch Ratings has assigned an 'A-' rating to approximately \\$602.6 million of Wayne County Airport Authority, MI's (WCAA) senior lien airport revenue and revenue refunding bonds, series 2015C-G.

Additionally, Fitch has affirmed the 'A-' rating on approximately \\$1.9 billion outstanding senior lien and \\$166.2 million junior lien airport revenue bonds to finance Detroit Metropolitan Airport (DTW). The Rating Outlook on both lien ratings is Stable.

The 'A-' rating reflects DTW's central geographic location and essentiality to Delta's system as seen in their fully residual long-term airline use and lease agreement (AUL) through 2032. The authority's ability to increase non-airline revenues and control operating expense growth while enplanements have remained relatively stagnant in recent years has helped maintain a stable financial position using internal liquidity despite thin underlying financial performance.

KEY RATING DRIVERS

Revenue - Volume: Midrange
Dependence on Delta Hub: The airport enjoys limited competition within the metropolitan area, which provides the airport with a catchment population of around 6 million. DTW is heavily reliant on its dominant carrier, Delta ('BB', Outlook Positive), which maintains a significant market share with 76% of airport enplanements. The traffic profile is 52.9% connecting leaving DTW susceptible to realignment of Delta's hubbing service. Enplanements have remained broadly stable at around 16 million since falling 11% in fiscal year (FY) 2009 (ended September 30).

Revenue - Price: Stronger
Strong Cost Recovery Structure: The AUL is 100% residual with long-term expiration in 2032 and with multiple airlines beyond the dominant carrier, Delta. Cost per enplanement (CPE) was \\$10.42 in FY2014 and is expected to increase to near or above \\$11 by FY2019 as debt service ramps up. However, signatory airlines are tied into covering all airport costs until at least 2032.

Infrastructure & Renewal Risk: Midrange
Modest Capital Needs: Having recently completed a multi-billion capital program the airport's investment plans are primarily focused on airfield work. The capital program will be funded from a combination of proceeds from previous issuance, grants, and new money borrowing.

Debt Structure: Midrange (Senior Lien), Midrange (Subordinate Lien)
Variable Rate Debt Exposure: Compared to other airports of its size DTW has a relatively high debt burden with approximately \\$2 billion outstanding. Around 79% of WCAA's debt is fixed rate with 21% paying an unhedged variable rate and subject to some refinancing risk. Upon reaching the maximum annual debt service (MADS) in FY2019, the profile is flat-to-declining. All reserves are cash-funded.

Moderate Leverage and Liquidity: WCAA's financial performance has been stable in recent years as it has been able to pass along costs to carriers through residual agreements. Total leverage of 8.82x net debt/cash flow available for debt service (CFADS) is comparable to peers while having sufficient balance sheet liquidity of 251 days cash on hand (DCOH). FY2014 debt service coverage ratio (DSCR) as calculated by Fitch is 1.15x on the senior lien and 1.06x on the junior lien without the benefit of the sizeable revenue fund balance.

Peer Group: WCAA's peers include Atlanta (rated 'A+/A') and Minneapolis-St. Paul (rated 'AA-/A') airports, given their status as major Delta hubs accounting for over 75% of enplanements and over 45% connecting traffic. Detroit has a materially higher CPE and leverage, and fewer DCOH.

RATING SENSITIVITIES

Negative - Exposed Economic Area: The financial challenges of both Detroit and Wayne County could spill over into other surrounding areas causing a significant decline in locally based traffic demand.

Negative - Hub Loss: A material reduction in, or elimination of, connecting traffic will cause CPE to rise and operating margins to weaken.

Positive - Increasing O&D Traffic: Higher than projected passenger growth driven by O&D gains, yielding a lower cost per enplanement and reduced leverage would lead to positive rating action.

TRANSACTION SUMMARY

The series 2005 bonds will be refunded into series 2015A,B,C, &F bonds for an estimated savings of \\$3 million annually. The \\$85 million series 2015A bonds will be directly placed with PNC Bank, \\$75 million series 2015B bonds will be directly placed with Bank of America, \\$26 million of series 2015C bonds will be directly placed with Citi, and the remaining \\$229 million of series 2015F will be a public offering. The \\$245 million of series 2015D&E new money bonds will be issued to fund projects in the capital improvement plan (CIP). Additionally, the airport will be refunding approximately \\$100 million of the series 2001 hotel bonds issued by the county onto the senior lien as the series 2015G bonds. The hotel's revenues and expenses will be added to the airport's flow of funds, allowing excess revenue after paying debt service to help offset airline costs. After the series 2015A-G transaction, debt service will increase to MADS of \\$172.8 million in 2019 before slowly declining through maturity.

Enplanements have been broadly flat since FY2009, having grown at a compound annual growth rate (CAGR) of 0.3%. Traffic rebounded 0.9% in FY2014 after declining 0.6% in FY2013. Though the first nine months of FY2015, traffic has increased an additional 0.4%. Recent growth has been driven by low-cost carriers increasing their collective market share at the airport to 12.9% so far in FY2015, as well as domestic O&D traffic increasing 7.6%. Enplanements on non-Delta carriers are up 8.8% this year.

DSCR, as defined in WCAA's debt ordinance, has remained robust in recent years, around 1.50x for the senior lien and around 1.40x for the junior lien. These have been supported by the relatively stable traffic performance, and improved non-airline revenue performance, which grew 3.5% in FY2014, increasing revenue per enplanement to \\$8.27 from \\$8.06 in FY2013. Higher non-airline revenues have been primarily driven by increased parking revenue; however, recent investments in both retail and food and beverage concessions in the McNamara Terminal have grown revenues further.

Fitch calculates DSCR excluding the impact of revenue fund balances from the ratio, and these have remained stable at historical levels between 1.10-1.15x for the senior lien and around 1.05x for the junior lien - while these may appear tight, they are backed by the fully residual AULs to 2032 with numerous airlines including not only Delta but also United/Continental, American/US Airways, Southwest, Spirit, Fedex and UPS. WCAA's DSCR including the revenue fund balance for FY2014 was 1.43x on the senior lien and 1.33x on the junior lien. The 'A-' rating on both the senior and junior debt reflects the little leverage and financial coverage distinctions between the two lien levels based on existing debt secured by airport net revenues.

The airport's proposed FY2016-20 CIP is moderate at \\$607.5 million with 53% of funds to be spent on runway improvements and airfield projects. The plan is funded through a mix of grants, funds available from previous bond issuances, the series 2015DE bond issuance and an additional \\$175 million in future bonds. Overall size is similar to the previous FY 2014-18 CIP, but reflects removal of projects completed and updated cost estimates and timing for other projects. The plan has not yet been approved and will be presented to WCAA's board later in September.

The WCAA is a political subdivision and instrumentality of the Charter County of Wayne, Michigan (Wayne County, 'B'/Stable Outlook). Wayne County holds legal title to the property related to the Detroit Metropolitan Airport and Willow Run Airport. Pursuant to the Michigan Local Financial Stability and Choice Act (Act 436, or the Authority Act), Wayne County has entered into a consent agreement with the state of Michigan that grants the county government special powers aimed at addressing Wayne County's current financial distress. Act 436 includes provisions that seek to limit the ability of Wayne County to interfere in the functioning of the airport or the exercise of WCAA's powers to deal with airport revenues or property. Pursuant to the Authority Act, WCAA has sole jurisdiction with the exclusive right, responsibility and authority to occupy, operate, control and use both airports. The Authority Act and federal law proscribe any use of airport revenues and property for other than the support of airport related activities. The WCAA operates as a separate legal entity and receives no funding and purchases minimal routine services from Wayne County. Fitch does not view the WCAA credit as being exposed to material risks from the on-going Wayne County fiscal distress or actions it may take under consent agreement.

SECURITY

The senior debt has a first lien pledge on net airport revenue while the junior debt has a second lien pledge of net airport revenues.