ORANJESTAD- On April 10, 2012 Credit Rating Agency Moody’s announced that it has upgraded the rating of the Aruba Airport Authority N.V. from Baa3 to Baa2. Moody’s last rating of AAA dated from January 26, 2012, when AAA’s Baa3 rating was placed under review for possible upgrade. This review has now lead to AAA’s upgrading.
In Moody’s several rating categories, it has rated AAA under the so called Government Related Issuer (GRI) methodology which combines the Baseline Credit Assessment (AAA’s stand-alone credit quality) with the assessment of AAA’s correlation with the Government of Aruba, AAA’s sole shareholder. Moody’s notes that AAA’s credit quality is substantially constrained by its view of the Government of Aruba’s own credit quality.
In Moody’s analysis AAA’s dependence on the tourism sector, possible developments in Venezuela (comprising 12% of the traffic), the possible introduction of a tourism levy that could negatively impact the cost competitiveness of the airport and the Government of Aruba’s request to pay dividends after meeting the bond covenants are mentioned as challenges that AAA is facing.
In the same analysis Moody’s mentions the co-operation agreement with Schiphol as one of AAA’s keys strengths and one of the drivers that lead to the upgrade of AAA’s rating. According to Moody’s the agreement with the A1/Stable rated Schiphol helps operational and management efficiencies. Other rating drivers that are being mentioned are the fact that the traffic proved relatively resilient to the global economic recession, a diversified airline base with the largest airline share not exceeding 16%, AAA’s moderate debt load, solid debt service coverage ratio and strong liquidity position, providing financial and operational flexibility, supportive legal covenants and investor protection in the indenture, and finally the moderate capital program which likely will not require additional indebtedness in the near future.
In its announcement Moody’s states that “the adjustment reflects the sustained improvement in operational and financial metrics supported by increasing passenger traffic over the past few years. Enplanement levels have increased annually since 2009 and were minimally impacted by the financial global crisis.”
AAA’s CEO Peter Steinmetz comments “In economically turbulent times, as we have witnessed over the last couple of years, we have become accustomed to downgrading of banks, governments and other institutions. It is therefore all the more remarkable that in that same era Aruba Airport Authority’s bonds have been upgraded, squarely going against this current. We, at Triple A, feel that our efforts to create a financially solid entity are paying off and are being recognized by the financial world. This creates a beneficial image of not only the company but also of the island as a whole.”
For Moody’s complete report please refer to www.moodys.com