DBRS Confirms Pearson International Fuel Facilities Corporation at A (low)

DBRS has today confirmed the A (low) rating on the Amortizing Bonds of Pearson International Fuel Facilities Corporation (PIFFC or the Company) with a Stable trend. The credit profile of PIFFC continues to evolve as expected, with rising aircraft traffic at Pearson International Airport (Pearson) and prudent management supporting the operating profile. The tight contractual structure also remains supportive, securing PIFFC’s exclusive rights over fuelling services at Canada’s busiest airport until 2032.

The Company reported EBITDA growth of 17% for the fiscal year ended June 30, 2007, helped by entry fees paid by four new members of the consortium and higher airline charges to cover the cost of new debt and revised rent payments to the Greater Toronto Airports Authority (GTAA). Fuel dispensed was up by only 1.3%, however, reflecting slower traffic growth at Pearson and a shift in aircraft traffic mix towards smaller aircrafts. As expected, total debt nearly tripled to $110 million on the March 2007 bond issue, which was used to repay bank loans, fund the six-month debt service reserve and pre-fund the ongoing capital program. Nevertheless, the DSCR only fell slightly to a still solid 2.2 times in FY2007, as debt was issued close to fiscal year-end.

EBITDA is set to jump markedly again this year as airline recoveries are increased to make up for the full-year impact of the 2007 bond issue. However, growth in fuel dispensed will remain below historical trend. The large cash balances are expected to be sufficient to fund capital projects until the end of 2008, with the priority for the year being the construction of the new remote tank farm. As such, debt will be unchanged this year, although the DSCR should decline to about 1.5 times due to rising interest charges.

Slowly improving airline profitability and projected passenger traffic growth of nearly 3% per year at Pearson going forward point to the continuation of sound operating results. Additional debt needs of $15 million to $45 million are foreseen over the medium term to complete the capital plan, which remains dependent on the timing of the new Pier G and the extent of the cost-sharing with GTAA. Nonetheless, DBRS still expects the DSCR to hover around 1.3 times over the longer term, which is consistent with other infrastructure credits

Note:
All figures are in Canadian dollars unless otherwise noted.