Moody’s downgrades outlook for O’Hare revenue bonds

Posted Jan. 10 at 5:20 p.m.

By Jon Hilkevitch | A major credit rating firm delivered a stern warning Monday regarding the mounting risks that Chicago is taking by going deeper into debt in an attempt to build more runways at O’Hare International Airport without securing financial support from the airlines.

Moody’s Investors Service downgraded to a “negative” outlook from “stable” some of the revenue bonds that the Chicago Department of Aviation has issued to help pay for the $15 billion O’Hare Modernization Program and related projects.

Moody’s cited concern about the city’s latest gambit to postpone repayment of all interest on some construction bonds until at least 2018, resulting in much larger payments over the long run. The airlines and their customers would eventually be stuck paying for the increased borrowing costs through higher landing fees and higher airfares.

The city’s deferred-repayment strategy is part of an emergency plan in which airport officials plan to soon borrow an additional $1 billion to keep O’Hare expansion alive. The airlines have threatened to take the city to court, contending that their long-term lease agreements at O’Hare require airline approval of bond sales supported by airport revenue.

United Airlines and American Airlines, the dominant carriers at O’Hare, say they still want the additional runways planned for O’Hare. But the airlines have balked at the price tag and complained in talks with city officials that the expansion plan is not “fiscally responsible,” according to sources close to the negotiations.

Moody’s also expressed reservations in its downgrade of the O’Hare expansion bonds.

“The complexity of this very large program and the current uncertainty in how the project may be funded are substantial risks in completing” the final two new runways, the extension of an existing runway, construction of a western terminal complex and a People Mover airport transit extension connecting the western terminal to the main terminals, Moody’s said.

Completion of the project is estimated to cost more than $3.5 billion, according to the city.

City officials were not immediately available to comment Monday afternoon.

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