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Moody's Gives Thumbs Down to O'Hare Expansion

Investment rating agency says the $8.4 billion airport project is 'credit negative'

April 06, 2018

The Chicago Sun-Times reports Wall Street rating agency, Moody's Investors Service, labeled Chicago's O'Hare Airport project as “credit negative” on Thursday because it will “increase leverage and airline costs above those of airport peers, weakening O’Hare’s competitive position and airlines’ profitability.”

Moody’s rates O’Hare A2 with a stable outlook. O’Hare also carries ratings within the single-A level from Fitch Ratings, Kroll Bond Rating Agency, and S&P Global Ratings.

Although Moody's is no longer invited to rate Chicago's bond deals per Mayor Emanuel's request, the agency was the first to comment on the City Council's plans for an initial $4 billion in bonding laid out and passed last month.

BondBuyer.com reported Moody's opinion in a commentary published Thursday in its weekly credit outlook.  “The proposed capital plan is credit negative for O’Hare Airport Enterprise because it will increase leverage and airline costs above those of the airport’s peers, weakening O’Hare’s competitive position and airlines’ profitability at the airport if growth fails to materialize.”

O'Hare currently has $7 billion in outstanding general airport revenue and passenger facility charge debt. The city expects to issue the $4 billion of general airport revenue and passenger facility charge backed bonds in at least two deals over several years with the first sale likely coming in late 2018 or early 2019. The city expects to return in the coming years for further authorization as the current plan relies on borrowing to cover the full cost.

Combined with future borrowing for the expansion project, O'Hare's debt load will reach $14.5 billion by 2022.

Chicago chief financial officer Carole Brown told aldermen during a recent council committee hearing on the airport plans that she believed the city could hold the airport ratings steady despite the increase in debt because the makeover is needed to expand capacity and improve the airport's competitive edge. During questioning on the ratings, she said: “I don’t look at Moody’s anymore.” Moody’s is the sole agency to rate the city’s general obligation debt at speculative grade, assigning its Ba1 rating.

Read the Sun-Times article here.

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