Los Angeles International Airport kept double-A ratings on its senior-lien revenue bonds from all three major credit agencies ahead of a $950 million bond sale that will more than quintuple its debt at a time when the airline industry is in a steep descent.
Both Standard & Poor’s and Fitch Ratings rated LAX’s senior debt AA and the subordinate-lien debt AA-minus. Moody’s Investors Service rated the senior debt Aa3 and the subordinate bonds A1. All three agencies assigned a stable outlook.
“This is the highest rating Standard & Poor’s has assigned to a U.S. general airport revenue bond and is among the highest rated of all transportation-related enterprises,” analyst Mary Ellen Wriedt said in a report.
LAX, the West Coast’s biggest airport, is in the midst of its biggest renovation effort since before Los Angeles hosted the 1984 Summer Olympics. The airport plans to spend $4.1 billion to rebuild its terminals and improve its runways over the next six years, with $1.7 billion of the project costs financed by debt.
It plans to issue about $875 million of new-money bonds before the end of this month, its biggest new-money deal in more than a decade. It also plans to sell another $75 million or so of refunding bonds if market conditions permit.
“Standard & Poor’s expects that airport and city management will continue to implement the plan in a manner that will preserve the airport’s financial and operational strengths,” Wriedt wrote.
She said those strengths include the airport’s dominant market position in a large, wealthy service area, its exceptionally low debt levels, excellent debt service coverage ratios, solid cash position, and experienced management team merited the high rating.
“LAX has a strong and well-developed diversity of air carriers and maintains a very healthy liquidity position and strong financial margins,” Fitch analysts Jesse Ortega and Peter Stettler said in their report.