DBRS Confirms Montréal International Fuel Facilities Corp. at A (low)

DBRS has today confirmed the rating on the Amortizing Bonds of the Montréal International Fuel Facilities Corporation (MIFFC or the Company) at A (low), with a Stable trend. The Company continues to exhibit sound credit fundamentals, as highlighted by the 6.7% growth in fuel dispensed and the continued growth of the consortium in 2007, as well as slowly amortizing debt and continued tight management of operations and capital projects. However, reduced payments required from airlines for debt amortization under the bond financing, as well as lower membership fee revenue from new members, reduced EBITDA by 14% to $63.1 million and brought the Company back into a small deficit position in 2007 after several consecutive years of surplus. Although somewhat weaker than expected by DBRS, performance was consistent with the not-for-profit mandate of MIFFC. Combined with the full-year impact of the June 2006 bond issue on debt servicing, the softer results led to a notable decline in the ratio to 1.2 times, compared to 1.8 times the prior year.

Looking forward, results are expected to continue to hover around breakeven position. For 2008, MIFFC forecasts 4.3% growth in fuel volumes and lower expenditures resulting from declining system expansion work at Trudeau International Airport. With capital investments slowing down and no new borrowing planned for the foreseeable future, debt will continue to slowly decline over the years to come, allowing the DSCR to stabilize at around 1.2 times. However, soaring fuel prices and softening global economic conditions point to much slower growth in the membership base and the likelihood of weakening financial profiles among airlines over the years to come. Tight collection practices, two-month prepayment of user fees and the mechanism under the Interline Agreement allowing MIFFC to recover bad debt from active members will continue to effectively mitigate airline credit risk.

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