KBRA Assigns A+, Stable Outlook to Chicago O'Hare International Airport Senior Lien GARBs
8 Oct 2024 | New York
KBRA assigns an A+ rating, with a Stable Outlook to General Airport Senior Lien Revenue Refunding Bonds, Series 2024C (AMT) and Series 2024D (Non-AMT); and General Airport Senior Lien Revenue Bonds, Series 2024E (AMT) and Series 2024F (Non-AMT) to be 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.
Proceeds of the Series 2024C and Series 2024D Refunding Bonds will be applied by the City to refund a portion ($1.5 billion) of outstanding Series 2015A-D GARBs for debt service savings. The Series 2024E and Series 2024F Bonds will refund a portion ($256.0 million) of certain outstanding Passenger Facility Charge (PFC) Revenue Bonds, with an ultimate goal of reducing debt service supported by PFC Revenues.
General Airport Senior Lien Revenue Bonds (GARBs), including the Series 2024C and Series 2024D Refunding Bonds and the Series 2024E and Series 2024F 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. Debt service on the Series 2024E and Series 2024F Bonds is additionally payable from and secured by a pledge of Other Available Moneys consisting of a subordinate pledge of PFC Revenues imposed by the City at O’Hare.
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 Airlines and American Airlines.
- 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 pro-forma GARBs totaling $10.5 billion.
- 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 expectation that enplanement-related growth in non-airline revenue, along with increasing airline payments, will support expected, additional GARBs 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.
This Press Release has been updated on October 10, 2024 to update the labeling of the Series 2024E and Series 2024F Bonds to reflect the most current version of the POS subsequent to the last publication date.
This Press Release has been updated on October 9, 2024 to update the labeling of the Series 2024E and Series 2024F Bonds to reflect the most current version of the POS subsequent to the last publication date. Additionally, the use of proceeds for the Series 2024C and Series 2024D Refunding Bonds has been clarified.
To access rating and relevant documents, click here.