PJIAE gets Moody’s Baa2 rating with stable outlook

Moody’s Investors Service, Inc. has assigned an initial Baa2 rating to the Princess Juliana International Airport Operating Company NV’s (PJIAE) senior secured bonds.


"The outlook is stable." Thus began the press release datelined New York, November 5, 2012, announcing the rating. It is the first time that St. Maarten or any company on the island would be assigned such a rating.

Moody’s, one of the world’s leading provider of credit ratings, research and risk analysis, stated in its press release that, "PJIAE is a private limited liability corporation with regulated rate setting ability and operates the Princess Juliana International Airport in the country of Sint Maarten (Baa1/stable outlook)." The firm had simultaneously assigned a sovereign rating of Baa1, stable outlook to the government of St. Maarten.

"The sole owner of all capital stock is Princess Juliana International Airport Holding Company, N.V. (PJIAH), which is in turn wholly-owned by the Government of Sint Maarten," Moody’s further noted in its release, which can be found at www.Moody’s.com.

It added: "The bonds are being issued under an exchange offer of outstanding bonds and will also include new funds for use in advancing the airport’s capital plan. Major projects contained in the plan include upgrades to the general aviation/fixed based operation facilities, runway resurfacing, and improvements to taxiways."

Moody’s ratings provide investors with what the firm calls "a simple system of gradation by which future relative creditworthiness of securities may be gauged."

Moody’s ratings therefore reflect the opinion of Moody’s Investors Service regarding the relative creditworthiness of securities.

A Baa2 rating means the obligations are deemed to "be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics," Moody’s explains, while the numerical modifier "2" indicates "a mid-range ranking" within the generic rating category.

"This is definitely great news for PJIAE and for St. Maarten," Managing Director of PJIAE Regina LaBega commented. "It opens the way for the further development of the airport and gives our creditors a very comfortable feeling."

"It is certainly an achievement the Supervisory Board Of Directors of the Operating Company, Management team, the Shareholder and the whole island can be proud of, especially since PJIAE is the first government-owned company to achieve such rating by a world-renowned firm like Moody’s," LaBega added.

Moody’s ratings and analysis "track debt covering more than 110 countries, 11,000 corporate issuers, 22,000 public finance issuers, and 94,000 structured finance obligations," according to the firm’s website.

In its "Ratings Rationale", the firm said: "Moody’s rates PJIAE under the Government Related Issuer (GRI) rating methodology which incorporates a Baseline Credit Assessment (BCA) representing the authority’s stand-alone credit quality as well as Moody’s assessment of the correlation of default dependence and the likelihood of potential extraordinary support from the Government of Sint Maarten."

"The Baa2 reflects a high default dependence and strong likelihood of extraordinary support in relation to the Government of Sint Maarten given the direct ownership linkage and the airport’s role in delivering tourists to the island."

It further added: "The rating incorporates a BCA of baa3. The BCA of baa3 incorporates the airport’s resilient enplanement trends through severe economic volatility, the diversification of air service providers, and the airport’s role as a hub for connecting passengers to nearby tourist destinations in Anguilla and Saint Barthelemy."

"Enplanement levels have increased annually since 2009 and were minimally impacted by the global economic recession."

"Additional credit strength comes from the relatively stable economy and institutional framework in Sint Maarten," Moody’s continued in its press release.

"The rating also considers the fact that PJIAE is the only large scale airport on the island of Sint Maarten/Saint Martin, and that it plays a critical role in the island’s predominantly tourism-based economy. Major tourism draws are Sint Maarten/Saint Martin’s dual culture (Dutch and French, respectively), large timeshare property stock, and close proximity to high end tourist destinations, such as St. Barths, that lack sufficient airport facilities to service commercial airline service on their own."

"Additionally, the naturally formed bay in Sint Maarten provides an attractive docking spot for mega-yachts. The owners of the yachts access the island through general aviation facilities at PJIA," Moody’s noted.

"Also factored in the BCA are the favorable legal covenants and investor protections in the bond indenture. These include … cash funded debt service reserve funds that cover three months debt service, and a closed loop of funds that does not allow dividends to be paid to the holding company, retaining all excess cash flow for airport purposes," Moody’s stated.