A.B. Won Pat International Airport Authority, Guam

May 14, 2018 – Tamuning, Guam – On May 11, 2018, Moody's Investors Service issued a report finding that the on-going lawsuit by DFS against GIAA, and specifically Guam Superior Court's February 5 judgment voiding GIAA's $152 million concession contract with Lotte Duty Free Guam, is "credit negative."

"GIAA takes the report issued by Moody's Investors Service very seriously," said GIAA Chairman of the Board Ricardo Duenas. "We've been very concerned that the Court's decision could seriously impact GIAA's credit rating, its bond covenants and potentially its signatory airline agreements, and therefore, Airport operations, the Guam visitor industry, and the economy of our island."

According to the Moody's report: "A loss of the contract with Lotte Duty Free Guam, LLC would be credit negative for GIAA because a newly procured concession agreement could offer lower annual revenues and there could be a temporary loss in revenue if Lotte exits the airport before a new public procurement of the contract has been completed. This would put short-term pressure on debt service coverage ratios." The report notes that the Lotte concession contract represents about 22% of GIAA's 2017 operating revenue.

On May 9, 2018, more than three months after GIAA's original request for a stay, the Superior Court issued an order staying the judgment, pending Judge Barcinas' determination of DFS's motion to amend. While the Court ruled in DFS's favor in granting the February 2 judgment, DFS was unhappy with terms of the judgment and asked the Court to change it. GIAA has objected to and opposed DFS's motion to amend, asking the Court to stay the judgment and let the Guam Supreme Court decide the case. On May 10 the Court issued an Order asking for suggestions on changing his judgment per DFS's motion, which GIAA will reply to in due course.

While the Court's judgment ordered GIAA to abide by the voided contract, Lotte Duty Free was under no such obligation. "Judge Barcinas' order created a potential financial disaster for the Airport, and thus, GIAA worked to get Lotte to agree to stay and abide by the terms of the voided concession contract, even during the on-going $110 million arrivals floor construction project," said Duenas. GIAA was successful in getting Lotte to agree to abide by the concession contract pursuant to a Mediation Term Sheet dated April 26, 2018. With this action, GIAA was successful in mitigating the risk of violating its bond covenants and harm to the bondholders.

"With all due respect to the Court, the February 5 judgment injected a tremendous amount of uncertainty into the Airport's financial picture," concluded Chairman Duenas. "Despite the Court's failure to act until finally issuing the conditional stay on May 9, GIAA worked to mitigate the impact of the judgment by securing Lotte's commitment to stay in the airport while the appeal to the Supreme Court runs its course. We are hopeful that the Court permanently stays the judgment without further delay and allows the Supreme Court to decide this important matter, rather than accommodating DFS's continuing efforts to devalue the Airport concession."

For any questions, please contact Genevieve Rapadas at 646-9355 or [email protected]

• Download: 2018-5-11-Issuer comment-GIAA
• Download: Order After Hearing
• Download: Order for Proposed Amendments