That Moody’s confirmed the Ba1 rating of the US $142.6 million secure notes issued by Princes Juliana International Airport Operating Company N.V. (PJIAE) due in 2027 and changed the outlook to “negative” (see related story) is hardly good news, but not entirely unexpected. As the report says, the lowering of the company’s Baseline Credit Assessment (BCA) reflects the profound distortion to St. Maarten’s economy and PJIAE’s commercial activity from Hurricane Irma over the next 24 months.
A slow, gradual recovery of airplane movements is expected, with consequently an “extremely weak financial performance and cash-generating capacity” of PJIAE. Over the next four to six quarters. PJIAE won’t be able to meet the minimum debt service ratio, which could trigger a default by March 2018, and the rating agency foresees obtaining a waiver from noteholders in the coming weeks to prevent such.
However, the “strong likelihood” of extraordinary Government support was also mentioned. A key factor is that PJIAE will have enough liquidity to meet its payments over the next 12-18 months considering cash available, a six-month debt service reserve fund of some US $7 million and insurance proceeds.
It’s obvious that the Airport is going to have a hard-enough time making ends meet and won’t be able to produce more revenues for the shareholder as had been the desire of caretaker Finance Minister Richard Gibson. Adding a departure tax to the current facility charge paid by passengers is clearly no longer an option either any time soon, with the tourism economy in its current dismal state.
The reality is that international flights will remain limited as most major resorts stay completely or partially closed until the next high season starts at the end of 2018, while some apparently won’t even reopen for two years. In the meantime, the Airport is going to need all the help it can get.
