Moody’s downgrades Princess Juliana International Airports rating to B1 with a negative outlook. Approximately US$142.6 million of debt securities affected
March 22, 2021, 5:44 pm
Rating Action: Moody’s downgrades Princess Juliana International Airports rating to B1 with a negative outlook Global Credit Research – 22 Mar 2021 Approximately US$142.6 million of debt securities affected New York, March 22, 2021 — Moody’s Investors Service, (“Moody’s”) downgraded the rating to B1 from Ba3 assigned to Princess Juliana Intl Airport Op Company N.V.’s (PJIA) $142.6 million (Approximate original issuance amount) Senior Secured Notes due 2027. Moody’s also confirmed PJIA’s Baseline Credit Assessment (BCA) of b3 and changed the outlook to negative. The rating action concludes the rating review that initiated on February 11th, 2021.The rating action follows Moody’s rating action in which the agency downgraded the Government of St. Maarten’s rating to Ba2 from Baa3 and changed the outlook to negative. For more information on the Government of St. Maarten please visit moodys.com.Ratings Downgraded:..Issuer: Princess Juliana Intl Airport Op Company N.V…..Senior Secured Regular Bond/Debenture, Downgraded to a B1 from Ratings under Review, Ba3Outlook Actions:..Issuer: Princess Juliana Intl Airport Op Company N.V…..Outlook, Changed To Negative From Rating Under ReviewRATINGS RATIONALEThe rating action reflects PJIA’s linkages with the Government of St. Maarten, the support provider under our analytical framework for Government Related Issuers (GRI).Moody’s estimates a BCA of b3 for PJIA representing the airport’s stand-alone credit quality. Under the GRI framework, Moody’s also incorporates its assessment of a “high” default dependence and a “strong” likelihood of potential extraordinary support from the Government of St. Maarten. The rating downgrade to B1 from Ba3 reflects a weaker credit profile of the Government of St. Maarten, which under our GRI framework provides a two-notch uplift from the assigned BCA.The b3 BCA reflects PJIA’s short-term challenges such as: (i) tight liquidity, (ii) breach of two covenants that require waivers from investors, (iii) debt service payments that will continue to be made in the coming quarters from IATA collections of Airport Departure Fees and liquidity available, mainly business interruption proceeds and (iv) the uncertainty around enplanement recovery in 2021.PJIA also benefits from a $21 million fully committed facility that may be used to cover operating expenditures during reconstruction of the airport. We acknowledge the airport’s essential role for St. Maarten’s economy and its key role as a local hub connecting passengers to eight nearby tourist destinations.The rating also reflects the airport’s weak enplanement trends as a result of the coronavirus outbreak. Enplanements in 2020 were 63% below 2019. For 2021, we expect enplanements will improve but only to 50% of 2019, resulting in continued weak financial performance that will lead PJIA to continue to rely on available cash for its operations and meeting debt service payments. Importantly, in our base case forecast we do not expect PJIA to draw from its 6-month debt service reserve fund.The negative outlook reflects the uncertainty surrounding passenger recovery and the liquidity pressures faced by PJIA. The negative outlook is also in line with the Government of St. Maarten’s rating outlook.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGIn light of the negative outlook, upward pressure on the ratings is unlikely in the near term. A downgrade on St. Maarten’s rating could result in a downgrade of the ratings. In addition, increased liquidity pressures stemming from lower enplanement levels than expected could also exert downward pressure on the ratings.ABOUT PRINCESS JULIANA INTERNATIONAL AIRPORTPrincess Juliana International Airport Operating Company N.V. is a private corporation with regulated rate setting ability. PJIAE operates the Princess Juliana International Airport, which is the major commercial airport on the island of Sint Maarten/Saint Martin and serves as a hub for connecting traffic to eight nearby Caribbean islands such as Anguilla, St. Barths, Tortola, Saba, St. Eustatius, Nevis, St. Kitts and Dominica. The sole owner of all capital stock in SXM is Princess Juliana International Airport Holding Company N.V., which is 100% owned by the Government of St. Maarten (Ba2 Neg). SXM is managed by a Managing Director under supervision of a Supervisory Board consisting of between three and seven members.The methodologies used in this rating were Privately Managed Airports and Related Issuers published in September 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1092224, and Government-Related Issuers Methodology published in February 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186207. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004. https://www.google.com/amp/s/finance.yahoo.com/amphtml/news/princess-juliana-intl-airport-op-214406347.html