Breaking with its rating agency peers, Standard & Poor’s Ratings Services said Friday that the city of Chicago’s ambitious plan to expand O’Hare International Airport is “sound.”
Standard & Poor’s affirmed its current ratings, ranging from “AA” to “A-,” on about $6 billion of current O’Hare debt and assigned an “A-” rating to about $1.1 billion in bonds the city plans to issue in early February.
“The ratings incorporate our view of O’Hare’s generally sound air travel demand as a result of being one of the world’s largest and most important connecting hub airports, the airport’s significant additional debt needs, its high exposure to connecting traffic, and high air carrier concentrations,” said S&P credit analyst Joseph Pezzimenti.
The New York-based ratings agency focused narrowly on the effect the proposed $1.1 billion bond issue would have on O’Hare’s level of indebtedness, which would increase 13.9 percent, to almost $7.3 billion.
The February bond issue would keep construction workers busy as the city begins laying the groundwork for the final, $3.3 billion airfield projects, which have not been approved by the city’s largest airline tenants: American and United Airlines.
Pezzimenti did not address a follow-on bond issue of $4.2 billion, which the city will need to complete Chicago Mayor Richard Daley’s sweeping overhaul of the airport’s runways.
The financing would cause the airport’s total debt burden to nearly double to $11.4 billion by 2015, with much of that to be borne by the airlines through higher landing fees and rents, as well as passengers, who will face higher ticket taxes. United and American have threatened to sue to block the funding.
Fitch Ratings and Moody’s Investor Service this week expressed concern that the total expansion and capital projects planned for O’Hare would saddle the airport with among the heaviest debt load of any U.S. airport at a time when future air travel growth is uncertain.
Fitch downgraded O’Hare bonds to ‘A-,’ and Moody’s revised its outlook for $5.1 billion in O’Hare bonds to “negative” from “stable.”
But United and American are likely to continue to house giant hubs at O’Hare, providing strong air travel demand that should ensure that airport’s finances remain sound, Pezzimenti said.
jjohnsson@tribune.com
