Hawaii Department of Transportation airport division revenue bond ratings and bonds issued by the state backed by car rental fees were upgraded by Fitch Ratings, which cited full recovery on enplanements.
Fitch upgraded the airport's $1.7 billion in revenue bonds to AA-minus from A-plus and $111.6 million in certificates of participation to A-plus from A on Thursday. The airport division also has $45.9 million in parity COPs not rated by Fitch.
Separately, the rating agency upgraded Hawaii's $392.5 million rental car customer facility charge revenue bonds to A-plus from A.
The rating agency also revised the outlooks on both credits to stable from positive.
In both cases, Fitch analysts cited improved financial metrics, a full recovery on enplanements and great clarity on its capital program. Analysts also noted the dependence on air travel between Hawaii's islands, which provides the airport system with a sizable base of enplaned passengers of 19 million.
"The ratings reflect the essentiality of air services to the state's island system of airports, which encompasses a high degree of tourism and leisure-focused traffic from long-haul domestic and international passengers," analysts wrote. "The rating distinction between the revenue bond liens reflects the subordinated nature of the obligation securing the COPs and weaker coverage covenants when compared with those of the senior debt."
Major projects, across the airport system have been completed in recent years, Fitch analysts wrote, adding that while additional borrowing may be needed to fund the capital program, analysts expect the overall financial position to remain robust aided by federal grants and a strong liquidity profile.
The airport is expected to debt fund roughly 77% of its $1.7 billion capital plan that extends through 2028, accounting for prior and planned debt issuances, Fitch analysts wrote.
For the rental car facility bonds, Fitch analysts pointed to substantial destination traffic supporting solid rental car transaction day performance, as well as collections at the five facilities of the statewide consolidated rental car facility system. The upgrade "reflects a strengthening credit profile evidenced by rebounding transaction volumes and a robust average rating case debt service coverage ratio of 3.1 times through maturity."
Major rental car construction projects at the Honolulu and Maui airports have been completed, Fitch analysts wrote.
"Credit strengths include the broad CFC collection authority across the five main Hawaiian airports, high coverage at existing transaction levels, limited capital expenditures under the system-wide rental car construction program, conservative covenants, and sizable cash reserves," analysts wrote.
