"Fitch Rates Broward County, FL Airport Revenue Bonds 'A+'"

Wednesday, June 18, 2003

Fitch Rates Broward County, FL Airport Revenue Bonds 'A+'
Business Wire


NEW YORK--(BUSINESS WIRE)----Fitch Ratings today assigned an 'A+' rating to
$89,855,000 Broward County, FL airport system revenue refunding (ASR) bonds,
series 2003 (non-AMT). The Rating Outlook is Stable. The bonds are secured
by net revenues of Fort Lauderdale-Hollywood International Airport (FLL).
Pricing for the series 2003 bonds will be July 1, and the bonds will be sold
on a negotiated basis. Senior managers are Siebert Brandford Shank and
Merrill Lynch. Other banks in the syndicate area Loop Capital, Ramirez &
Co., William R. Hough & Co., and Janney Montgomery Scott, LLC. The bonds are
being sold on par with $546 million outstanding ASR bonds, which Fitch also
affirms at this time. Additionally, FLL has $160 million passenger facility
charge (PFC)/airport system revenue convertible lien bonds outstanding,
which are being serviced by PFC revenue until 2012, and at that time will
convert to ASR bonds.

The 'A+' rating on the ASR bonds reflects the airport's high origination and
destination (O&D) traffic and low cost structure, its wealthy and growing
service area, and its strong enplanements record, especially in comparison
to national averages since Sept. 11, 2001. This rating also accounts for a
large capital plan and the very competitive south Florida air traffic
market. 

In addition, the Fort Lauderdale-Hollywood International Airport's (FLL, or
the airport) passenger base grew at an average annual rate of 8.1% during
1995-2002, the fastest growing large hub airport in the nation during this
time, including the nationwide decline in air travel due to 9/11/01. FLL has
experienced among the highest growth in the nation, due largely to its low
cost structure and high O&D base. Overall, enplanements growth has been
driven by the expansion of several airlines, including Southwest Airlines
Co., Delta Express, jetBlue, and Spirit Airlines, as well as the continued
growth in the airport's service area. First quarter fiscal 2003 enplanements
was the busiest quarter in FLL's history, with fiscal year-end enplanements
likely to surpass pre-9/11/01 levels, one of the first airports in the
nation to do so. International service is also expanding and represents 7%
of total enplanements. 

FLL traffic is 97% origination and destination (O&D), limiting the airport's
dependence on any particular airline and providing comfort that any lost air
service will be made up by other airlines in a relatively short time. The
high O&D traffic levels and FLL's well balanced airline market share are
credit strengths. Management has successfully increased the airport's
non-airline revenue base; non-airline revenue accounted for 64% of operating
revenue in fiscal 2002 and as a result, FLL's airline cost per enplaned
passenger (CPE) was $3.99 in fiscal 2002. Due to solid cash flow, debt
service coverage on the ASR bonds was strong in fiscal 2002 at 1.65 times
(x). FLL currently has an unrestricted cash balance of $51.9 million. Debt
service on the ASR bonds ramps up from $23 million in 2006 to $32 million in
2006, and peaks at $52 million from 2010-2012 before decreasing to about $41
million for the following 10 years. Major projects include $118.5 million of
terminal improvements, $183 million of airfield improvements and $387
million of roadway & other landside projects. FLL expects to finance a
portion of this CIP with $230 million of new money bonds in 2004, $77
million of which will be ASR bonds and $133 million will be double-barrel
PFC/ASR bonds. 

Credit concerns include the moderately competitive south Florida airport
environment, as Miami International Airport (MIA) (rated 'A' by Fitch) and
Palm Beach International Airport (PBI) (rated 'A' by Fitch) are located
about 25 and 45 miles from FLL, respectively. However, it is important to
note that the population of the south Florida region is large enough to
generate sufficient demand for the three airports. 

Furthermore, the air service provided by MIA complements that of FLL, as MIA
focuses primarily on long-haul domestic and international traffic, FLL on
mostly short- to medium-haul flights. Additionally, accelerated growth
within the service area has forced the airport to continually re-evaluate
its CIP, so although no additional debt is planned through fiscal 2005,
capacity constraints might lead to more leveraging in the short term.


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