Greater Orlando Aviation Authority upgraded by Moody's, Fitch and KBRA

Greater Orlando Aviation Authority's senior bonds were upgraded to Aa2 by Moody's Ratings, AA by Fitch Ratings and AA-plus by KBRA and its subordinated bonds were upgraded to Aa3, AA-minus and AA by the three agencies, respectively.

The upgrades affect $3.3 billion in outstanding and expected bond debt.

The authority is planning a $159.7 million senior bond and $684.1 million subordinate bond to be priced the week of December 2, according to the authority.

In explaining the upgrade Moody's said it expects the authority, whose primary airport is Orlando International Airport, to have continued strong performance, with robust financial metrics and leverage that will increase but remain lower than those of its peers.

The airport benefits from declining annual debt service requirements that will reduce the impact of its planned $5.4 billion five-year capital plan on its financial metrics, Moody's said. The airport's leverage of $109 adjusted debt per origin and destination enplanement in 2023 was among the lowest of large hub airports and, given expectations of airport enplanement growth, will not increase significantly with the planned capital plan bonds.

The airport has a near-monopoly position for air travel in one of the world's primary tourism destinations.

As for credit challenges, Moody's noted the airport's lack of long-term use and lease agreements with the airlines, which could lead to reduced airport service if demand drops. It also highlighted the risk of additional debt to fund the five-year capital plan.

However, Moody's said the risks are mitigated by the authority's long track record of expense management and capital project management supporting strong financial metrics.

Fitch pointed to similar factors in its rating report. Despite anticipated capital-related debt borrowings through 2028, forward-looking leverage is expected to remain below 7 times, which would leave the authority strongly positioned in the AA rating category.

The airport benefits from stable traffic and use by a diverse set of airlines, Fitch said. It added the authority plans to use past and future bonds to provide about half the money for the current capital plan.

Fitch raised its outlook on the bonds to positive from stable in November 2023.

KBRA pointed to similar factors for its upgrade and also noted the authority's ample liquidity. It said the airport's significant funding from non-airline sources is a credit positive.

The upgraded Moody's, Fitch and KBRA ratings carry stable outlooks.

The planned bonds will primarily be used to finance the costs of improvements to the airport system and refinance certain lines of credit.

"Airport facilities revenue bonds are a vital tool for funding the expansion and modernization of our airports," said Kevin J. Thibault, CEO of the Greater Orlando Aviation Authority. "The upgrades ... will help to leverage future revenues as we invest in the infrastructure needed to enhance our passengers' experience. Additionally, the bonds will help GOAA to deliver projects from replacing automated people movers to upgrading North Terminal infrastructure and completing capacity-enhancing projects in Terminal C, ultimately supporting the economic growth of our region."

The senior bonds are rated AA by S&P Global Ratings. S&P upgraded the bonds in June.