KBRA Assigns 'A' Rating to Chicago Midway Airport Senior Lien Airport Revenue Refunding Bonds Series 2024A (AMT) and Series 2024B (Non-AMT); Affirms Rating for Parity Bonds; Withdraws Rating for Second Lien Airport Revenue Bonds
7 Mar 2024 | New York
KBRA assigns a long-term rating of A with a Stable Outlook to the City of Chicago, IL Chicago Midway Airport: Senior Lien Airport Revenue Refunding Bonds, Series 2024A (AMT); and, Senior Lien Airport Revenue Refunding Bonds, Series 2024B (Non-AMT). KBRA additionally affirms the long-term rating of A for parity Senior Lien Airport Revenue Bonds. The Outlook for each obligation is Stable.
Finally, KBRA withdraws the long-term rating of A for the City's Chicago Midway Airport Second Lien Airport Revenue Bonds. This action follows the City's retirement of all remaining legacy First Lien Bonds, closure of the previously existing first lien, and redesignation of outstanding Second Lien Bonds as Senior Lien Bonds under the Amended and Restated Senior Lien Master Indenture of Trust.
Key Credit Considerations
The rating actions reflect the following key credit considerations:
Credit Positives
- Strong, diverse, expansive air trade area supports O&D activity.
- Ranks as the third busiest airport in its dominant carrier’s (Southwest) route system as measured by enplanements and scheduled seat capacity.
- Residual agreements obligate airlines, mainly Southwest, to absorb necessary rate and rental charge increases.
Credit Challenges
- High level of carrier concentration, as Southwest accounts for nearly 90% of enplaned passenger activity.
- Narrow debt service coverage, reflecting an adequate, although strengthened, rate covenant and residual airport use agreement.
- Non-airline revenue performance ranks among the lowest of U.S. commercial airports.
Rating Sensitivities
For Upgrade
- Diversification of the carrier mix with concurrent enplanement growth.
- Successful transformation of terminal concessions, resulting in enhanced non-airline revenue support.
For Downgrade
- Significant reduction in Southwest Airlines operations at Midway.
To access rating and relevant documents, click here.