The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Nassau’s airport operator has slashed annual losses by almost 70 percent ahead of its upcoming $130m debt refinancing that is due to be placed before Christmas.

The Nassau Airport Development Company’s (NAD) financial statements for the year to end-June 2018, released to investors as part of the offering materials, reveal that its net comprehensive loss fell by almost $10m year-over-year - dropping from $14.153m to $4.371m.

The Lynden Pindling International Airport (LPIA) operator’s improved financial performance was driven by increased passenger traffic stemming from Baha Mar’s full opening, plus fee increases, both of which contributed to significant hikes in passenger processing and facilities fees.

Passenger facility charge revenue grew by 15.5 percent or over $7m, rising from $45.464m to $52.508m, while processing fees were up by 51.4 percent from $7.525m to $11.396m. As a result, total operating revenue jumped from $77.028m to $89.396m, a 16 percent rise that put NAD closer than ever before to covering both operating expenses and $68.473m in financing costs.

And NAD is projecting that it will turn a comprehensive profit of $2.56m for its current financial year to end-June 2019, driven by further increases in passenger facility and other forms of revenue.

The enhanced outlook is timely as NAD moves to refinance its “participating debt”, or second tier debt, that was taken on to finance LPIA’s $409.5m redevelopment. The debt is split into several layers or tranches, with the “participating debt” accounting for around 25 percent of NAD’s total $522m debt at end-June 2018. Its holders rank behind those owning its senior secured debt in any creditors queue.

The offering term sheet, distributed to investors by CIBC and RoyalFidelity in their capacity as joint placement managers, confirms that NAD is seeking to refinance “high cost” debt with securities that will carry a fixed 7.5 percent interest coupon payable quarterly. They will have a 17-year term, meaning they will mature - and principal be returned - by 2035.

“NAD is seeking to refinance the high cost participating debt put in place in 2009 at the height of the financial crisis,” the term sheet said. “While the new notes are repayable by 2035, NAD intends to reduce the outstanding balance on a quarterly basis as cash flow permits.

“Should interest payments not be made, the interest will be added to the principal balance and accrued interest repaid from future excess cash-sweep mechanisms provided in the note agreement.

“In addition to substantially reducing the carrying cost of its debt, the refinancing of the participating debt may result in more of NAD’s debt being denominated in Bahamian dollars, substantially reducing interest costs and fees to convert Bahamian dollars to US dollars for repayment of principal and interest.”

Describing LPIA as the fourth busiest airport in the Caribbean, with 84,000 aircraft movements in its last financial year, the term sheet added: “LPIA served nearly 3.5 million passengers in fiscal year 2018 and generated $89m of revenue.

“The airport is served by 23 airlines offering travel to 56 international and domestic destinations. LPIA’s historically stable passenger flow and increasing hotel room inventory in The Bahamas, combined with steady revenue and EBITDA growth since 2015 result in a stable credit profile.” Nassau/Paradise Island’s room count now stands at 8,009.

“Passenger traffic for fiscal year 2018 was 6.2 percent above prior year,” the term sheet said. “While traffic has been stable and predictable over the past 10 years, with the addition of new rooms to the destination and more aggressive marketing NAD is experiencing greater growth.

“The United States remains LPIA’s largest origin/destination market for both inbound and outbound travel at 83 percent of international origin/destination. NAD continues to add seat capacity with new markets, aircraft up-gauges and added daily and weekly frequencies from existing and new carriers. Capacity additions through summer 2019, currently on sale, represent a 13.5 percent increase in seat capacity over the prior year.”

Vantage Airport Group’s contract to manage NAD expires on April 1, 2019, having already been extended for two years, with the company’s EBITDA having increased from $28m in 2009 to more than $60m under its stewardship.