S&P Affirms BBB(SPUR)/Stable Long Term Investment Grade Rating

Standard & Poors (S&P) affirmed its "BBB" long-term rating and underlying rating (SPUR)* on the A.B. Won Pat International Airport, Guam's 2013 senior-lien General Revenue Bonds, with a stable outlook. "The stable outlook reflects our anticipation that the Airport's financial performance will remain steady, supported by consistent or improving passenger levels", according to the ratings summary released by S&P on June 19, 2017. This investment grade rating is part of S&P's annual surveillance review of the airport credit. The S&P Summary acknowledged the Airport's susceptibly to economic conditions in our key airline markets, our enplanement costs, large capital plan and demands on internal resources, and vulnerability to typhoons. However, they also acknowledged the offset to these conditions include:

Strong enplanement growth of 4.8% in 2016; with continued strong growth of 5.2% projected for fiscal 2017 and 3.4% annually thereafter;
Strong market position and essentiality as the only commercial facility on the island, combined with its remote location;
Strong origin and destination (O&D) nature, with approximately 94% of total passengers traveling to or from the island; and
Recent history of good financial performance, demonstrated by improved coverage and liquidity and good cost containment.

S&P provided an upside scenario, stating "we could raise the ratings during the two year outlook period if there is a material change to demand, and to the extent there is a significant reduction in capital needs such that higher levels of liquidity are sustained.

In regard to finances, the S & P rating statement reads" financial performance measures have been consistently adequate," due to cost recovery nature of the airlines' use and lease agreements. The Authority's Debt Service Coverage (DSC) in FY 2016 was 1.75, well over the required 1.25 required by the bond indenture.

"Our capital improvement program is at full thrust to keep Guam on the forefront of the aviation industry, as a regional aviation hub and the economic engine of our economy," stated Charles "Chuck" H. Ada II, Executive Manager. "We are beginning the 3rd largest capital improvement in the Guam Airport's history, the International Arrivals Corridor, that will increase safety and passenger processing efficiency with the separation of inbound and outbound passengers. Other critical projects such as the development of Common Use Terminal Equipment (CUTE) ticket counters will maximize the use of ticket counter space, and moving our baggage inspection services to the back of the house are critical improvements for our Airport. The announcement by Standard & Poor's affirms that Guam's airport has been managing its position very well, balancing costs with necessary development. We have consistently increased our enplanements year after year, is continued increases is projected for the next three years going forward," continued Chuck Ada. S&Ps statement can be accessed at www.standardandpoors.com, and a copy is made part of this release.

* A SPUR is an opinion about the stand-alone capacity of an obligor to pay debt service on a credit-enhanced debt issue, without giving effect to the enhancement that applies to it. These ratings are published only at the request of the debt issuer or obligor with the designation SPUR to distinguish them from the credit-enhanced rating that applies to the debt issue. S&P Global Ratings maintains surveillance of an issue with a published SPUR.

Source: https://www.standardandpoors.com/en_US/web/guest/article/-/view/sourceId/504352#ID7393080