Costa Rica: Airport to Issue $127 million in Bonds

The company managing San Jose International Airport will be issuing bonds in order to refinance bank debt assumed in the works to expand the terminal.

Tuesday, September 22, 2015

From a statement issued by Moody´s:

New York, September 18, 2015 -- Moody's Investors Service, ("Moody's") assigned a provisional rating of (P) Ba2 to Aeris Holdings Costa Rica S.A. de C.V.'s issuance of approximately US $127 million of senior notes ("Notes"). Proceeds will be used to refinance the outstanding loans consisting of roughly $89 million obtained in 2011 from Overseas Private Investment Corporation and Inter-American Development Bank, and $25 million of the IBSA Subordinated Loan (a loan from the shareholders).

Upon review of final documentation, unless there are material changes to the information and documents reviewed to date, we would expect to assign a definitive rating of Ba2 to the bonds.

Aeris Holding Costa Rica S.A. ("Aeris") operates Aeropuerto Internacional Juan Santamaria ("SJO"), Costa Rica's (Ba1 stable) main airport, under a management contract (Contrato de Gestión Interesada, "CGI") due May 2026. Responsibilities include the provision of services for the operation, management, maintenance, renovation, financing, construction and promotion of the airport.


The (P) Ba2 rating is supported by the airport's strategic importance to Costa Rica, where its market share is 80% of total air travel. Handling more than 80% of the country's tourists, a significant portion of its revenues come from international travelers, providing the company with a natural hedge to the domestic economy and related risks. Recent passenger trends have been positive, with a compound annual passenger growth of 3.2% since 2010. These growth trends are expected to continue given the better economic prospects for the United States of America, origin of 50% of international travelers.

The assigned rating also reflect a comparatively short time remaining under the CGI contract (around 11 years), coupled with the challenges of a large capital investment program for the first five years of the life of the Notes. Under the CGI, these investments are to be recovered via tariffs, with a set Internal Rate of Return, over the shorter of the next ten years or the time left under the contract. As such, any material shortages and/or delays on the capital program, might have a negative impact on Aeris' revenues. While Moody's acknowledges the clear tariff-setting and investment recovery provisions under the CGI, including an economic equilibrium provision, we also note that the governing contract is different from the concession agreements under which most other privately managed airports operate outside of the United States.

Under our Base Case, Funds From Operations to Debt is expected to average 29.7% and Moody's Debt Service Coverage is estimated to average 2.4x over the life of the Notes, in line with the Ba range under Moody's rating methodology. Nevertheless, over the first few years of the transaction these metrics are weaker given the large capital investments incurred over this period. The rating also takes into account the subordination of the IBSA Subordinated Loan. Over the first five years of the life of the Notes, IBSA Subordinated Loan interest payments will be capitalized. If cash is available, and if a historic and projected Debt Service Coverage Ratio of 1.2x is met, then IBSA interests payments may be made starting 2019. No principal payments to the IBSA Subordinated Loan are permitted until the Notes, and any accrued interest, have been paid in full.

The rating is also supported by the project finance features under the Notes, including: a trust managed cash waterfall, a 6-month (one semiannual payment) debt service reserve account, a forward looking 3-month Operation and Maintenance Reserve Account, limitations on additional indebtedness, distribution lock-up tests, and a Capital Expenditure Prefunding Account, equivalent to around 20% of the total Capital Program.

The rating outlook is stable. The stable outlook reflects Moody's expectation that Aeris will continue to show a positive trend of passenger growth, execute the capital program to maintain its infrastructure to support the demand growth, and sustain manageable debt levels and strong liquidity leading to solid cash interest coverage ratios.


Upward pressure on the rating could develop if Aeris' passenger growth exceeds projections on a sustainable basis leading to consistent stronger credit metrics with Moody's debt service coverage ratio above 1.8 times.

Downward pressure on the issuer and debt ratings could develop if there are sustained decreases in passenger traffic or if there are significant capital expenditure overruns, or Aeris' credit metrics weaken on a sustained basis with cash interest coverage ratio consistently below 2.0 times or its FFO/Debt ratio was consistently below 7.5%.

The principal methodology used in this rating was Privately Managed Airports and Related Issuers published in December 2014. Please see the Credit Policy page on for a copy of this methodology.

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