Millennium Parking Garages LLC 'BBB+' Senior Secured Notes Ratings Affirmed; Outlook Stable

  • S&P Global Ratings revised its financial forecast for Chicago-based Millennium Parking Garages LLC (MPG) based on management's strategy to strengthen monthly contracted volumes and develop alternative revenues. The strategy stems from a decline in transient parking revenues (which currently contribute about 70% of parking revenues) that has underperformed our base case. We anticipate the transient revenues (e.g., earned from day, or short-term parkers, including tourists) will decline to contribute close to 60% of total revenues over the forecast period (compared to our assumption of 74% previously). Our detailed base-case forecast assumptions are provided below, but broadly, we are assuming compound annual growth rate (CAGR) of about 2.14% per year in net revenues for the next 40 years.
  • We affirmed our 'BBB+' ratings on MPG's senior secured debt. At this time we have no sound basis to severely revise our growth rate assumptions lower but note that ride sharing and other shifts in transportation behavior as a function of technology advances introduce some uncertainty around long-term growth prospects of parking garages, which we expect will become more visible to us and the market in the next five or so years.
  • Our updated parking revenue forecast, which is on average 5% per year lower than our previous base-case forecast, bringing the project closer to its downgrade trigger (see below). We could revise the outlook to negative if management fails to execute on its budget plans in the next two years as we view those plans as important in shifting revenue reliance away from transient parkers.
  • The stable outlook reflects our view that the project will generate cash flows in line with our base-case growth assumptions and that the minimum debt service coverage ratio (DSCR) will remain around 1.8x.
TORONTO (S&P Global Ratings) Nov. 28, 2018--S&P Global Ratings today took the 
ratings actions listed above. The affirmation reflects our continued 
expectation of minimum coverage of around 1.80x under our revised financial 
forecast. Our updated parking revenue forecast (see Base Case section below) 
is about 5% lower than our previous base-case forecast but results in only 1 
basis point decline in the project's minimum debt service coverage to 1.79x 
from our previous expectation of 1.80x. However, with our revisions, average 
DSCR declines to 2.13x from 2.24x. 

The stable outlook reflects our view that the project will generate cash flows 
in line with our base-case growth assumptions and that the minimum DSCR will 
remain around 1.8x.
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