Fitch Downgrades DFW Airport

DALLAS – Dallas-Fort Worth International Airport took another downgrade Friday as Fitch Ratings lowered its revenue bond rating to A from A-plus.

The Fitch downgrade comes a week after Moody’s Investors Service lowered DFW to A2 from A1 in advance of two issues worth a combined $800 million this month and next.

Both agencies revised their outlooks to stable from negative following the downgrades.

DFW has stepped up its debt issuance for its $2 billion terminal remodeling program to capture interest rate savings.

The downgrades impact about $4.7 billion in outstanding DFW joint revenue improvement bonds.

“In Fitch's view, the rising debt burden over the next 12-24 months will result in high leverage, estimated at 13 times to 15 times net debt to cash flow,” wrote Fitch analyst Reed Singer. “The mounting debt presents a higher degree of risk with regard to financial flexibility and cost competitiveness.”

Much of the $2 billion terminal renewal and improvement program as well as another $2.2 billion of airport improvements will be funded by up to $2 billion of additional borrowings.

DFW's debt is expected to peak at $6.5 billion by 2014. The cost per enplanement is likely to double from the $6.59 level in fiscal 2012, according to Fitch.

DFW, the largest issuer of debt in the Southwest region for 2012, expects to issue $370 million of revenue bonds subject to the alternative minimum tax rules on April 18 and $367 million of non-AMT bonds on May 16.  The DFW Airport board was expected to approve the deal Friday.

The underwriting team on the first issue will be led by RBC Capital Markets, with M.R. Beal as co-senior manager.  Raymond James and Ramirez & Co. are co-managers.

Morgan Stanley is book runner on the second deal, with Cabrera Capital Markets as co-senior manager.  Loop Capital Markets and Stifel Nicolaus & Co. are co-managers.

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