NEW YORK–Moody’s Investors Service confirmed the Ba1 rating of the US $ 142.6 million (approximate original issuance amount) Senior Secured Notes issued by Princess Juliana International Airport Operating Company N.V. (PJIAE) due in 2027 and changed the rating outlook to negative. The rating action concludes the rating review that was initiated on September 13.
The rating confirmation at Ba1 reflects PJIAE’s status as a Government Related Issuer with Moody’s assessment of “High” default dependence and “Strong” likelihood of extraordinary support from the Government of St. Maarten (Baa2 RUR down), the sole owner of PJIAE.
Moody’s also lowered PJIAE’s Baseline Credit Assessment (BCA), a measure of the Airport’s standalone credit quality, to b1 from ba2.
The BCA change reflects the profound distortion to St. Maarten’s economy and PJIAE’s commercial activity from Hurricane Irma over the next 24 months.
“We expect a slow, gradual recovery of enplanements and as a consequence, an extremely weak financial performance and cash-generation capacity of PJIA [PJIAE – Ed.]. Over the next 4 to 6 quarters, PJIA will be unable to meet the Financial Covenant under the Notes of a minimum EBITDA to Debt Service ratio of 1.25x, that could trigger an Event of Default as soon as March 2018,” said Moody’s.
The service expects that in the coming weeks, PJIAE will obtain a waiver from the Noteholders to prevent the default.
A key consideration for the Moody’s-assigned BCA is that PJIAE will have enough liquidity to meet debt service payments over the next 12-18 months, considering cash available, a six-month debt service reserve fund (approximately US $7 million) in the Note’s structure, and expected insurance claim proceeds.
A rating upgrade in the near term is unlikely, said Moody’s. Evidence of support from the Government and/or the sustained recovery of PJIAE’s commercial operations could lead to the stabilization of the rating.
Failing to obtain a waiver from bondholders for the Financial Covenant will result in a rating downgrade. A downgrade of St. Maarten’s rating, or a reduced willingness or capacity from Government to support PJIAE, would also trigger a rating downgrade.
A reduction of available liquidity for debt service or a longer-than-expected recovery of enplanements in the Airport would also exert downward pressure on the ratings, said Moody’s.
The principal methodology used in these ratings by Moody’s was Privately Managed Airports and Related Issuers published in September 2017.
Source: The Daily Herald https://www.thedailyherald.sx/islands/72034-moody-s-changes-airport-rating-outlook-to-negative