Approximately $11.7 million of rated debt outstanding
New York, November 15, 2012 -- Moody's Investors Service has affirmed the Baa2 underlying rating to the City of Rapid City (SD) Airport Revenue Refunding Bonds, Series 2011A. The rating outlook is stable.
The Baa2 rating is based on the airport's market position as a key regional air transportation hub with very limited competition, solid financial performance, and solid bondholder protections. The airport is expected to enter into a five-year hybrid airline use agreement which will replace the existing month to month compensatory agreement. The stable outlook reflects Moody's expectation that enplanements will remain stable and that the new lease agreement will result in less volatile debt service coverage. The City of Rapid City operates Rapid City Regional Airport.
* Stable local service area that is being driven by the oil exploration industry
* Limited air service competition; no significant competition for over 300 miles
* Airport leverage will remain low including new debt; no additional debt planned
* Small local area population limits the breadth of the economy and the potential for enplanement growth
* Liquidity near 200 days is well below median
* Rate covenant allows for the use of unlimited rolling coverage from the Airport Capital Fund
The stable outlook is based on Moody's expectation that enplanement levels will stabilize and that debt service coverage will become less volatile under the new hybrid agreement to be entered into during 2013.
What Could Change the Rating - UP
Increases in airport revenues that elevate debt service coverage above 2.0 times for a sustained period and improvements in financial liquidity to median levels could place positive pressure on the rating.
What Could Change the Rating - DOWN
Enplanement declines that decrease debt service coverage below 1.25 times or increased cost per enplanement significantly above current levels could negatively pressure the rating.
The principal methodology used in this rating was Airports with Unregulated Rate Setting published in July 2011. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
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Earl Heffintrayer Analyst Public Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Chee Mee Hu MD - Project Finance Public Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
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