DBRS rates Greater Toronto Airports notes A

DBRS said it assigned a rating of A with a positive trend to the series 2016-1 medium-term notes of the Greater Toronto Airports Authority (GTAA).

The agency also confirmed the issuer rating and the ratings on the revenue bonds and medium-term notes at A with positive trends. All of the various series of medium-term notes and the revenue bonds rank pari passu.

Proceeds from the notes will be used to partially refinance the $350 million series 2005-3 maturing Feb. 15, 2016.

DBRS said the rating assignment and confirmation are supported by a declining debt load, good traffic growth, the expectation of strong cash flow generation from diverse revenue sources and the authority’s continued focus on cost controls, but is tempered by modestly higher capital expenditures over the near-term.

The agency noted that the supplemental indenture for the series 2016-1 medium-term notes revises the required amount in the debt service reserve fund to six months of interest payments from 12 months to better align with market practices, which DBRS believes is reasonable in light of the GTAA’s declining debt load and strong revenue generation.

The authority expects that all future supplemental indentures will also outline the requirement for a six-month debt service reserve for subsequent debt issues.

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