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Rating Action:

Moody's affirms the Baa1 rating on Chicago IL O'Hare's Airport CFC Revenue Bonds and subordinate TIFIA Loan; outlook stable

09 Nov 2020

New York, November 09, 2020 -- Moody's Investors Service has affirmed the Baa1 rating on the $234 million Chicago (City of) IL O'Hare Airport Customer Facility Charge (CFC) Revenue Bonds and approximately $272 million of the subordinate lien TIFIA loan. The outlook for both liens is stable.

RATINGS RATIONALE

The Baa1 rating of Chicago O'Hare's Customer Facility Charge Revenue Bonds (ConRAC) reflects the credit strength of passenger demand for the Chicago O'Hare Airport Enterprise (ORD; A2 negative) and the local economy. ORD is the primary commercial airport serving the nation's third largest population base, driving stability in transaction days and CFC collections. However, like all rated airports, ORD was materially impacted by the coronavirus outbreak and its performance is typical of an internationally-focused hub in the United States. Through July 31, year-to-date enplanements totaled 9.5 million, down 61% from same period FY 2019 and are expected to be down more than 60% for the year. As a result, this has negatively impacted visitor O&D enplanements resulting in a decrease in transaction days and CFC collections. While CFC collections are expected to be down in levels that are similar to enplanements, we believe that given the current CFC balances and the CARES Act funding that provides an additional $30 million to the facility for operating expenses and debt service, the ConRAC has sufficient funds to cover annual debt service of $28-$32 million in the event that they do not accumulate additional CFC revenues.

The facility also benefits from adequate liquidity, with funds pledged under the indenture upon issuance of the CFC bonds totaling $48.6 million as of August 2020, and an additional minimum of $20.0 million within the CFC stabilization fund. These funds provide an additional two years of liquidity if needed. The rating is constrained as the ConRAC has higher outstanding debt and leverage levels. Its 2019 ratio of ConRAC debt (including the subordinate TIFIA loan) to transaction days of $102.8 was the highest among ConRACs we rate.

The ratings additionally incorporate an event of default provision in both the TIFIA loan and the senior indenture of a TIFIA Bankruptcy Related Event of the city, which includes a broad definition of generally not paying debts as they come due. Any default would automatically cause the TIFIA to "spring" to parity with the senior lien bonds, the rationale for the parity rating.

The airport is department owned and governed by the City of Chicago (Ba1 Negative Outlook) and reported in the city's audit as an enterprise fund. The rating remains several notches above the GO because the airport is self-supporting and there are strong protections against diversion of airport revenues, including CFC revenues, for non-aviation purposes via federal law. However, in the event of extreme fiscal distress, there is a degree of contagion risk stemming from its connections to the city. Deterioration of the city's financial condition could also change the local area economic environment which will impact ORD's market position.

RATING OUTLOOK

The stable outlook is based on our expectation that liquidity will be sufficient to cover any shortfalls in debt service and operating costs until demand for rental cars returns to sufficient levels to fully support debt service payments.

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS

-A reduction in CFC debt, while maintaining 2.00x debt service coverage on a gross CFC collection basis

FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS

-Demand for rental cars do not return to normal levels, requiring the ConRAC facility to deplete its liquidity

-Debt service coverage below 1.30x which would require an increase in the CFC above the current $8.00 level

-Any change in FAA guidance or other precedent that would allow for greater revenue diversion from the ConRAC to the city's general fund, or allow for debt service payments to be disrupted

LEGAL SECURITY

The principal and interest on the bonds is payable from pledged receipts, which includes CFCs, facility rent payable by the RACs, and amounts available in the trustee funds including the debt service reserve fund, the subordinate debt service reserve fund, the rolling coverage fund, and the supplemental reserve fund. The debt service reserve is funded to 100% of maximum annual debt service (MADS) for the senior lien; the subordinate lien reserve will be funded to 100% of average annual subordinate lien debt service; the rolling coverage fund to 25% of senior lien MADS; and the supplemental reserve to 50% of senior lien MADS. Though not pledged to the bonds, the structure also benefits from the $20 million CFC Stabilization Fund. The RACs remit both the CFCs and monthly facility rent to the trustee. If the total amount collected is not sufficient to pay all debt service, operating expenses, and other costs, RACs are jointly required to pay their proportionate share of the deficiency.

PROFILE

Chicago O'Hare International Airport opened the consolidated rental car facility in 2018, located on a 33-acre site on the northeast side of the airport as part of a broader multimodal facility. The facility consists of multi-story structure used by rental car companies for ready/return operations, vehicle storage, plus a customer service center including counters and related facilities. The facility also includes a nearby quick turnaround vehicle service area and dedicated roadways.

METHODOLOGY

The principal methodology used in these ratings was Publicly Managed Airports and Related Issuers published in March 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1140469. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website 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.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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.

Myra Shankin
Lead Analyst
Project Finance
Moody's Investors Service, Inc.
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JOURNALISTS: 1 212 553 0376
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Kurt Krummenacker
Additional Contact
Project Finance
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
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U.S.A
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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