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Rating Action:

Moody's affirms A2 on Chicago IL O'Hare GARB and PFC Bonds; outlook is stable

11 Sep 2017

New York, September 11, 2017 -- Summary Rating Rationale

Moody's Investors Service has affirmed the A2 rating of the Chicago (City of) IL O'Hare Airport Enterprise's outstanding General Airport Senior Lien Revenue Refunding Bonds and PFC Bonds. The outlook is stable.

The ratings affirmations reflect Moody's view that the airport is strongly positioned to maintain its role as one of the most heavily utilized airports in the US due to the airport's large and economically varied local service area and favorable geographic location despite increasing airline costs and weak population trends over the broader region that the airport serves. The affirmation additionally considers that the airport will likely expand its capital plan to both renew existing terminal space and add additional capacity. The senior lien general airport revenue bond (GARB) ratings are based on the stable financial metrics provided by the airport's use and lease agreement. The rating is negatively pressured by the airport's current high leverage position, though levels should remain flat over the next four years as new debt issuance approximates amortization on the existing debt. While the airport is largely immune from the pension funding issues affecting other Chicago credits, Moody's expects that steps to remedy pension funding issues will reduce the trajectory of long-term economic growth, which will cause the airport to see weaker origination and destination (O&D) passenger growth than its international gateway peers.

The PFC bond rating reflects the same fundamental market position considerations of the airport and is additionally based on ample debt service coverage, which is expected to continue given the steady enplanement trend and the declining debt service schedule.

Rating Outlook

The stable outlook is based on our expectation that enplanements will grow just below 1% annually over the outlook period, a level that is lower than the growth expected nationally, and that the remaining portions of the airport's capital plan will be managed without large cost overruns, both of which will support airline costs that will not significantly alter the airport's competitive position.

Factors that Could Lead to an Upgrade

- Debt per O&D enplaned passenger below $300

- Sustained enplanement growth above the 2.5% expected by Moody's for the US airport sector as a whole

- Significant growth in non-airline revenues that reduces airline revenue below 60%

Factors that Could Lead to a Downgrade

- Severe and sustained enplanement declines

- Additional debt for current or future capital plan that increases debt to over $600 per O&D enplaned passenger

- Failure to reach an extension or new agreement of substantive length of the airline use agreement at the current expiration in 2018

- Any change in FAA guidance or precedent that would allow for revenue diversion from the enterprise to the city's general fund

Legal Security

Senior lien bonds are secured by a pledge of general airport revenues. The Series 2011A, Series 2008A, and Series 2010F bonds are also secured by a subordinate lien pledge of the airport's PFC revenues. The PFC support is pledged through maturity on the 2011A bonds, but only through 2018 for the 2008A and 2010F bonds. The PFC revenue bonds are secured by a pledge of gross PFC revenues. The claim on subordinate lien PFC revenues is junior to the airport's PFC revenue bonds, payments for certain projects at the Gary/Chicago International Airport, and would be junior to any Subordinated PFC Obligations issued by the airport, though none are currently outstanding or planned. The Series 2011B bonds are also secured by letter of intent grant receipts net of anticipated pay-go grant receipts.

The rate covenant in the senior lien indenture provide for sufficient funds to pay the operation and maintenance expenses at O'Hare and at a minimum meet 110% of the total debt service on all outstanding senior lien bonds. All outstanding senior lien bonds are supported by a common debt service reserve sub-fund equal to the maximum annual debt service.

Use of Proceeds

Not applicable.

Obligor Profile

O'Hare International Airport, located 18 miles northwest of Chicago's central business district, is classified as a large hub airport by the FAA. O'Hare occupies approximately 7,265 acres of land. The airport is in the process of constructing runways and removing others, but the airport generally has 8 runways active. The airport has four terminal buildings, totaling 189 aircraft gates and five hardstand positions. The large majority of gates (157) are exclusive use gates, 6 are preferential use, and the remaining 26, including all gates in the international terminal, are common use. The airport also has approximately 46,400 parking spaces, a hotel, 16 air cargo buildings, and nine aircraft maintenance hangars.

Methodology

The principal methodology used in this rating was Publicly Managed Airports and Related Issuers published in November 2015. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Regulatory Disclosures

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Earl Heffintrayer
Lead Analyst
Project Finance
Moody's Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
US
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Kurt Krummenacker
Additional Contact
Project Finance
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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