Austin, TX's Airport Bond Outlook Revised To Positive From Stable; 2019A Airport Revenue Bonds Rated 'A'

CENTENNIAL (S&P Global Ratings) July 11, 2019--S&P Global Ratings revised its outlook on City of Austin, Texas' airport bonds outstanding to positive from stable. At the same time, S&P Global Ratings affirmed its 'A' rating on parity airport revenue bonds outstanding and 'A-' rating on the city's hotel revenue bonds issued for the Austin-Bergstrom Landhost Enterprises Inc. (ABLE). S&P Global Ratings also assigned its 'A' long-term rating to the $22.2 million airport system revenue bonds series 2019A and $330.3 million airport system revenue bonds series 2019B.
We analyze the bonds using our "U.S. And Canadian Not-For-Profit Transportation Infrastructure Enterprises" (TIE) criteria.
"The outlook revision indicates that we could raise the rating in the next two years if we believe Austin Bergstrom International Airport maintains a strong financial risk profile as it issues additional debt to fund capacity enhancement projects that address rising enplanement levels," said S&P Global Ratings credit analyst Ken Biddison. We expect clarification regarding the additional debt needs and related impacts following the city's completion of the airport's (AUS) master plan update over the next two years.
The ratings reflects our opinion of AUS' very strong enterprise risk profile, strong financial risk profile, and an approximate estimate of $4.3 billion, 10-year, demand-driven capital improvement plan (CIP), for which the financial effects of potential additional debt issuances are unknown. The enterprise risk profile reflects an airport that has experienced robust enplanement growth (increasing 68% from fiscal years 2008-2018) from serving a large and economically vibrant service area tempered by modest competition of other airports. The financial risk profile reflects our opinion that the airport's debt service coverage (DSC; S&P Global Ratings calculated) metrics will face stress but remain strong while the debt burden increases to fund a portion of the sizable CIP.
AUS is approximately eight miles southeast of downtown Austin. It opened in 1999 and consists of a passenger terminal with 34 gates, approximately 14,300 public parking spaces, a consolidated rental car facility, and air cargo and general aviation facilities.
The positive outlook reflects the possibility that we could raise the rating in the next two years, depending on our evaluation of the completion of Austin's master plan for AUS, the additional debt needed to finance it, and the related impacts on the airport's financial metrics.
We could raise the rating in the two-year outlook period if we believe AUS' overall creditworthiness is commensurate with that of a higher rating.
We could revise the outlook to stable if additional debt needs exceed our expectations significantly, or the master plan update does not provide enough clarity regarding the airport's resultant financial metrics.
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