OREANDA-NEWS. October 07, 2015. Fitch Ratings has upgraded Florida Department of Transportation's (FDOT) \\$234.1 million Transportation Infrastructure Finance and Innovation Act (TIFIA) Rental Car Facility (RCF) loan for the Miami Intermodal Center (MIC) to 'A' from 'A-'. The Rating Outlook is Stable.

The upgrade reflects continued very strong operating performance, the strength of the TIFIA loan structure that provides ample cashflow cushion and rapid amortization, and favorable debt service repayment flexibility relative to peers. The Miami International Airport's (MIA) stable enplanement base of 20.2 million has contributed to the rental car facility experiencing seven straight years of transaction day growth along with outperformance in CFC collections. Repayment on the loan is expected 21 years ahead of maturity.

KEY RATING DRIVERS

Strong Rental Car Market: MIA is a major international gateway which supports a sizable rental car market to serve both arriving international and domestic passengers. Rental car transaction days rose by 4.0% in FY2014, to over 10 million and are estimated to further increase by at least 0.6% in FY2015, based on the first 10 months. The rental car market is well diversified with 16 participating companies, with Alamo as the largest contributor to customer facility charge (CFC) revenues and representing a quarter of total collections.

Supportive Revenue Framework: Based on existing transaction levels, project loans can be repaid solely from CFC payments. Starting in August 2015 the rate increased to \\$4.85 per day from \\$4.60 per day as is permitted under the loan documents, which stipulate that CFCs are to be increased by \\$0.25 every 5th year. To the extent CFCs are insufficient, the rental car companies are obligated to pay contingent rent to support a minimum 1.30x project life coverage ratio (PLCR). Current base case minimum PLCR calculated in accordance with the loan agreements is 2.98x.

Flexible Repayment Schedule with Early Amortization Expected: The TIFIA loan structure focuses on ultimate recovery by FY2044 by sizing amortization payments to a percentage of available funds. Even under a conservative rating case scenario, current financial forecasts indicate full repayment by FY2024.

Improving Financial Profile: The project has experienced a steady increase in rental car transaction days and pledged CFCs allowing for favorable coverage and liquidity ratios over the remaining life of the project loan, as well as significantly earlier debt repayment. Even with a modest 1% per annum growth rate in transaction days, minimum Fitch-calculated PLCR would be 2.17x and average net debt to cash flow available for debt service (CFADS) would be 3.0x. Reserves remain robust, including the project's operating reserve fund, secondary reserve fund, and debt service reserve fund.

Peers: The Miami airport consolidated rent-a-car facility maintains the highest level of transaction days relative to its peers. Closest peers are Atlanta (rated 'A-'/Stable Outlook by Fitch) and Charlotte (rated 'A'/Stable Outlook), which both have similar levels of project cost and similar airport profiles.

RATING SENSITIVITIES

Negative: A sustained significant reduction in rental car activity in the range of 10 - 20% or more from current levels due to enplanement trends.

Negative: Operational or cash flow underperformance that leads to a potential reliance on contingent rent from rental car companies to support loan payments.

Positive: Continued strength of MIA air traffic performance in conjunction with positive rental car transaction trends and sustained outperformance in terms of CFC collections.

CREDIT UPDATE

Rental car transaction day volumes have been trending upwards since 2007, and, based on preliminary information, are expected to further increase by at least another 0.6% in FY2015 to total 10.2 million. Activity continues to exceed expectations, and FY2015 year-to-date figures through July indicate CFC collections of \\$39 million compared to \\$38.7 million for the same period in FY2014. RCF operating expenses have increased to \\$4.5 million in line with budgeted routine maintenance.

Rental car operations are well diversified - 16 operators are currently present at the facility, the two largest being Alamo and Hertz with market share of 26% and 21% respectively.

Fitch's base case forecast reflects a projected 1% growth in transaction days and higher O&M expense, and indicates debt repayment by 2023. Under this base case, minimum Fitch-calculated PLCR, which deducts reserve balances from outstanding debt in the denominator, remains at or above 2.17x, while minimum PLCR calculated in accordance with the loan agreements, reflecting reserve balances in the numerator along with the present value of cash flows, is 2.98x. Net debt to CFADS peaks at 4.42x. Fitch's rating case analysis, which incorporates a 10% loss in CFC collections in 2016 followed by a moderate recovery as well as higher operating expenses, indicates the final repayment date could be pushed back to 2024 -- still well ahead of final maturity in 2044. Under this rating case, minimum Fitch-calculated PLCR remains at or above 1.94x while net debt to CFADS peaks at approximately 4.54x. Coverage levels and liquidity are both consistent with the 'A' rating.

The TIFIA loans consist of two borrowings totalling \\$270 million with a scheduled final maturity in 2044. The loans represent a highly structured financing with a cash waterfall managed by a trustee. There is no pre-set amortization schedule, a feature that limits default risk to the final maturity date. Reserves are very robust, at a combined level in excess of \\$70 million.

MIC serves as a hub for transit, rental cars, taxis and shuttle services for Miami International Airport. The project was developed by FDOT in partnership with Miami Dade County, the federal Department of Transport, Miami Dade County Expressway Authority and South Florida Regional Transportation Authority. The RCF portion of the project opened for business on July 13, 2010. Miami-Dade County's aviation department (MDAD) operates the RCF.