KBRA Rates Cities of Dallas and Fort Worth, TX Airport Joint Revenue Refunding and Improvement Bonds AA, Stable
9 Aug 2024 | New York
KBRA assigns a long-term AA rating, with a Stable Outlook to the Joint Revenue Refunding and Improvement Bonds Series 2024 (Non-AMT) issued by the Cities of Dallas and Fort Worth, TX ("the Cities") on behalf of Dallas/Fort Worth International Airport (DFW or "the Airport"). At the same time, KBRA affirms the long-term AA rating, with a Stable Outlook on outstanding Airport Joint Revenue and Improvement Bonds previously issued by the Cities on behalf of the Airport. Joint Airport Revenue and Improvement Bonds are payable from and secured by an irrevocable first lien on and pledge of the Airport’s gross revenues. Proceeds of the Series 2024 Bonds will fund capital improvements, refund outstanding commercial paper notes, fund a contribution to the reserve fund and pay costs of issuance.
Credit Positives
- Strong management team has demonstrated an ability to effectively deal with the complexities of running a major U.S. airport.
- Growing population and economic base support origin and destination (O&D) traffic.
- Significant non-airline activity diversifies revenues and provides a source of discretionary capital funding.
Credit Challenges
- High debt levels on per enplanement basis.
- High concentration with American Airlines as primary DFW carrier.
- Connecting traffic is a significant component of overall enplanement activity.
The Stable Outlook reflects KBRA’s expectation that airline and non-airline activity will continue to expand, which will in-part offset the additional costs associated with DFW’s extensive CIP. KBRA expects the additional gate capacity and efficiencies afforded by the program will further reinforce DFW’s critical importance in American Airline’s hubbing network and allow debt service coverage metrics to be sustained at levels above Ordinance requirements.
Rating Sensitivities:
For Upgrade:
- Ongoing population growth and strong local economic performance resulting in O&D enplanement increases, and elevated rental car, parking, and concession revenues, as debt is amortized.
- Timely completion of planned capital projects, with lower than anticipated related airline costs.
For Downgrade:
- Debt metrics increase to levels significantly more than what is currently forecast.
- While highly unlikely, the reduced importance of DFW as an American Airlines hub.
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