Fitch Ratings on Wednesday downgraded to junk $792 million of bonds issued in 1997 by the Port Authority of New York and New Jersey to build a terminal at John F. Kennedy International Airport.

The downgrade to BB with a stable outlook from BBB comes ahead of the planned sale of $857 million bonds later this month for further expansion at Terminal Four.

The terminal is being developed by obligor JFK International Air Terminal LLC, which entered into a long-term lease with the Port Authority, the owner of the airport. JFK IAT is owned by N.V. Luchthaven Schiphol and Delta Air Lines, which bought a non-majority stake earlier this year. The bonds are secured by rental payments and the pledge of a leasehold mortgage.

“The downgrade reflects reintroduction of construction risk to the IAT project, necessitating significant leveraging above current levels of debt, with inadequate construction risk mitigation addressing possible cost overruns and construction delays to achieve investment-grade credit quality,” Fitch said in a rating report.

Analysts cited modest levels of contingency funds and reliance on B-minus rated Delta as risks.

“Fitch views the construction risk and Delta counterparty risk as near-term rating constraints during the project’s construction phase, considering cost estimates are not currently locked in due to the design-bid-build project management approach,” the report said.

The expansion project will add nine gates to the terminals existing 16 at Terminal Four. The Port Authority issued $934.1 million of bonds subject to the alternative minimum tax on behalf of JFK IAT in 1997.

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