KBRA Assigns A+, Stable Outlook to Chicago O'Hare International Airport GARBs
22 Aug 2024 | New York
KBRA assigns an A+ rating, with a Stable Outlook to General Airport Senior Lien Revenue Bonds, Series 2024A (AMT) and Series 2024B (Non-AMT) issued by the City of Chicago ("the City") on behalf of Chicago O'Hare International Airport ("O'Hare" or "the Airport"). At the same time, KBRA affirms the A+ rating, Stable Outlook assigned to outstanding GARBs previously issued by the City on behalf of O'Hare.
General Airport Senior Lien Revenue Bonds (GARBs), including the Series 2024A and 2024B Bonds, are secured by a first lien pledge of Revenues derived from the operations of O’Hare and certain funds and accounts maintained under the Senior Lien Indenture. The Airport is owned by the City and operated by the Department of Aviation.
Key Credit Considerations
Credit Positives
- Strong, diverse, expansive air trade area supporting O&D activity that forms the basis for hubbing.
- Unique status as a dual connecting hub for both United and American.
- Elevated and increasing airline costs, partially tempered by airline profitability and the efficiency, capacity and financial benefits afforded by completed and in-process capital projects.
Credit Challenges
- Very high leverage, with GARBs increasing to $10.5 billion following issuance of the Bonds.
- Expected, significant future debt issuance through at least CY 2030, which will further elevate debt metrics.
- Execution and other risks attendant to a significant, complex multi-year capital plan.
The Stable Outlook reflects KBRA's expectations that O'Hare's traffic recovery will continue to make steady progress toward, and ultimately reach, the pre-pandemic level, resulting in increased non-airline revenues that may be used, along with increasing airline payments, to pay debt associated with Capital Programs implementation. O'Hare's fundamental importance to the Chicago region and, more broadly, the national airspace system, and continuing airline support for capital reinvestment at the Airport further inform KBRA's Outlook.
Rating Sensitivities
For Upgrade
- Sustained passenger traffic at or above the pre-pandemic level.
- A material increase in revenue contributed by non-aeronautical sources, notably concessions.
For Downgrade
- Issuance of GARBs beyond level currently disclosed, leading to diminished financial flexibility.
- Failure to address potential delays and/or cost overruns related to Capital Programs on a timely basis.
- While unlikely, the elimination or reduction of hubbing operations by United or American.
To access rating and relevant documents, click here.