The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas' major airport continues to leave its COVID debt woes behind it with the coverage ratio stipulated by its lenders now healthier than it has even been since the pandemic started.

Nassau Airport Development Company (NAD), operator of Lynden Pindling International Airport (LPIA), disclosed in its just-released annual report for the year to end-June 2023 that its debt service coverage ratio at that date stood at 1.55:1 - well in excess of the required 1.3:1 required by its financiers but for which it had to seek a waiver during two years of COVID.

This temporarily freed NAD from having to maintain that debt service coverage ratio, and the airport operator as a "precautionary measure" obtained the waiver's extension until December 31, 2022. Ultimately, that extension was not needed because NAD's debt service coverage ratio rebounded to 1.36 to one, above the limits stipulated by its financing terms, and has ultimately continued to improve since then.

And, in a further sign that NAD's financial health has been restored, the LPIA operator is forecasting that it will remain in compliance with its debt service coverage ratio for the next nine months through to September 30, 2024 - a signal that the prospect of needing government and Bahamian taxpayer support has been virtually eliminated.

"On September 30, 2020, the company was unable to achieve the debt service coverage ratio covenant requirement of 1.3 to one under the senior financing agreements," NAD's 2023 financial statements recalled.

"However, on November 25, 2020, the company obtained a waiver of the debt service coverage ratio covenant through the execution of an amendment and waiver agreement, which was extended to December 31, 2022.

"Additionally, the Government of The Bahamas expressed to the noteholders of the company’s senior debt, through a letter dated November 25, 2020, a commitment to take such action as may be necessary to enable the company to continue to meet its obligations under the senior financing agreements," the audited financial statements.

"The commitment letter was also extended to December 31, 2022. On September 30, 2022 the debt service coverage ratio was 1.36 to 1.00 and, as of June 30, 2023, the debt service coverage ratio is 1.55 to 1.00.

"The company’s current forecasted cash flows indicate that the debt service coverage ratio covenant is expected to be in compliance at 1.3 to one or above for each of the consecutive calendar quarters in the period through to September 30, 2024." As a result, NAD's management and Board determined that it was appropriate for the financials to be presented on the basis that the company is a going concern.

A debt service coverage ratio assesses whether a company has sufficient cash flow and income to pay its debts. It is normally calculated by dividing net operating income by total debt servicing costs, including both principal repayment and interest expense and, for NAD, the economy's re-opening and robust tourism rebound have driven a sharp improvement in key financial indicators.

Net operating income, which is key to the debt service ratio, improved by more than $18m in the 12 months to end-June 2023 to finish the period at $77.533m as opposed to $59.26m in 2022 when the airport and economy were dealing with the final removal of COVID-era restrictions.

Net income more than tripled, from $7.574m in 2022, to $26.643m, while total revenues of $108.2m rebounded to the pre-COVID levels enjoyed in 2019. Gary Sawyer, NAD's chairman, wrote in the annual report: "The final quarter of 2023 began with April numbers ahead of budget. Over the Easter holiday weekend, LPIA tracked 2,925 aircraft movements.

"Easter passenger traffic increased by 14.8 percent over 2022 but remained 12.2 percent behind 2019 traffic. By the end of April, there was an increase in passenger performance across all sectors compared to prior year - US passenger numbers up by 21 percent, international by 21 percent and domestic by 15 percent.

"Thanks to a collaborative approach to air service development with key industry stakeholders, overall seat capacity year-to-date improved by 18 percent. The uptick came primarily from Virgin Atlantic Airways and British Airways in the International sector," Mr Sawyer added.

"We rounded out the fiscal period with total operational revenue of $108.2m, up from $83.9m in 2022, and a net income of $26.6m compared to $7.5m in 2022. Financial year 2023 ended with 3.716m total passengers, financial year 2022 ended with 2.808m, and financial year 2019 ended with 3.997m."