DALLAS - Dallas-Fort Worth International Airport is the first Texas issuer, and the first airport, to carry a bond rating from Kroll.
DFW, one of the top bond issuers in the Southwest region for several years, received Kroll Bond Rating Agency's AA-minus rating in the agency's first report, issued Monday ahead of a $130 million revenue bond pricing later this month.
The outlook is stable.
Standard & Poor's last assigned its A-plus rating with stable outlook to DFW's previous $179 million Series B sale of revenue bonds. Fitch Ratings downgraded DFW to A from A-plus in April 2013, after Moody's Investors Service lowered its rating to A2 from A1.
DFW dropped Moody's this year, but Mike Phemister, vice president for treasury services at DFW, said Kroll was not seen as a replacement for Moody's.
"We dropped Moody's prior to the decision to use Kroll. We will continue using S&P and Fitch who have been rating DFW for a number of years," Phemister said.
"We felt that Kroll has a better understanding of large hub airports and they bring a new perspective to the airport sector," Phemister said. "Also we believe that their reports are comprehensive and will add value."
In their inaugural report, Kroll analysts led by senior director Harvey Zachem cited the airport's enormous impact on the economy of the Dallas-Fort Worth area and its $4.7 billion capital improvement program that runs through 2020. That includes the current $2.3 billion Terminal Renewal and Improvement Program that will remodel all four of DFW's original terminals with additional parking.
"Total borrowing is in the range of $4 billion," Kroll noted. "Additional issues are expected in the current year and in the 2016-17 period. At that point approximately $7.7 billion will be outstanding."
DFW began a debt restructuring program in 2009 that has yielded $473 million in savings, and provided airline relief during a troublesome period, analysts added.
Kroll enters the picture as DFW is preparing to compete with Dallas Love Field for long-haul service for the first time. The so-called Wright Amendment, an act of Congress that limited airline service from Love Field to Texas and eight nearby states, expires on Oct. 13.
Southwest Airlines will fortify its base at Love Field while American Airlines, recently emerged from bankruptcy in a merger with US Airways, remains the dominant carrier at DFW.
"KBRA believes that there may be only minor traffic erosion from DFW," analysts wrote. "Love Field is capped at 20 gates, and no international flights are permitted; a segment that is growing at DFW. In addition, growth in American Eagle and low cost carrier flights at DFW may offset losses to Love Field."
Phemister has said in the past that the end of the Wright Amendment is a "non-event" in the view of DFW, the nation's fourth-busiest airport with traffic and operations that dwarf those of Love Field.
When DFW offers its next bonds on June 25, he expects continued demand from investors who have faced slim pickings in a lean muni market this year.
"Interest rates remain very low and supply is still low," Phemister said. "We are anticipating another good transaction. This issue is non-AMT for non-terminal projects, primarily parking garages."
The bonds will price through negotiation with senior manager Morgan Stanley with executive director Ira Smelkinson as lead banker.
