LAX Stays Double-A

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.

For reprint and licensing requests for this article, click here.
Transportation industry
MORE FROM BOND BUYER