DAA suffers blow as agency cuts bond ratings
HEAVILY-indebted Dublin Airport Authority (DAA) suffered another blow yesterday after rating agency Standard & Poor's cut some of the authority's bonds to just two notches above junk.
Standard & Poor's cut some DAA bonds to BBB+ and said a further cut was more likely than not as the airport authority struggles with falling passenger numbers. The authority, which is responsible for Dublin, Cork and Shannon airports, has issued bonds worth €1.1bn to fund the construction of a new €1.2bn terminal in Dublin and improvements in Cork.
"We expect the financial profile of the Dublin Airport Authority to materially weaken from previous expectations because of significant declines in passenger traffic volumes," S&P said yesterday. "The negative outlook reflects our view that a recovery in traffic is uncertain at this stage, especially in the context of the current economic position of the Republic, which could place further pressure on DAA's business and financial profiles."
The Central Statistics Office said yesterday that the number of overseas visitors to Ireland last year was the lowest since 2005 after visitors made just 6.9 million trips, an 11.6pc fall compared with 2008. Irish people made just over 7 million trips abroad last year, down 10.5pc from 2008 and the lowest figure since 2006.
S&P will lower the bonds' ratings further if passenger numbers continue to tumble, the agency said yesterday.
"We would likely lower the rating if our assessment of DAA's financial profile were to deteriorate further in 2010 than currently anticipated," it added.
Union members at the DAA's three main airports voted three weeks ago in favour of a radical restructuring plan, which includes nearly 400 job cuts. More than 3,000 people are employed by the DAA, the majority of them in Dublin.
The DAA borrowed €600m in 2008 to fund the authority's €1.2bn expansion plan. It issued a 10-year bond in May 2008 carrying a yield of 6.59pc, significantly higher than the 6.1pc the DAA offered for its €250m 10-year bond in 2001. It also raised €250m from the European Investment Bank.