Lambert and O'Hare draw positive outlooks from S&P

St. Louis Lambert International Airport’s general credit and Chicago O’Hare International Airport’s customer facility charge and TIFIA ratings drew positive outlooks from S&P Global Ratings as revenues that support each have picked up steam in recovering from the pandemic.

S&P raised the outlook to positive from stable last week on the BBB rating assigned to O’Hare’s 2013 senior lien bonds backed by CFC charges and its Transportation Infrastructure Finance and Innovation Act subordinate loan.  

The city sold about $230 million of senior lien customer facility charge revenue bonds in 2013 and took out a $288 million subordinate lien TIFIA loan.

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"The outlook revision reflects our view that we could raise the rating over the next 24 months if rental car activity continues to recover or the city adjusts the facility rent and CFC rate as needed such that coverage, per our calculations, is maintained near 1 times-1.1 times," said S&P analyst Joe Pezzimenti.

Factors that weaken the rating include single-asset exposure with a narrow revenue stream that is tied to rental car activity at O’Hare and the potential drawdown in liquidity if demand does not rebound above pre-pandemic levels and the $8 rate is not increased.

A relatively high debt load with rising debt service and potential exposure to variable levels of passengers and rental car demand due to changing consumer and business preferences and travel behavior also strain the rating.

Credit strengths include the airport’s relatively large visiting origin and destination base, the monopolistic competitive position of the rental car CFC program, strong debt capacity supported by no additional new money debt needs, and an experienced and proactive management team.

“If actual performance does not trend better than forecast or the city does not increase the CFC rate and facility rent to ensure that coverage, per our calculations, will be maintained at or near 1.0x-1.1x, we will revise the outlook to stable,” the report said.

S&P revised Lambert’s outlook to positive from stable on the airport’s A-minus rating last week.  

“The outlook revision reflects STL's recent positive enplanement trends, with April 2022 monthly enplanements at 84% of April 2019 levels," said analyst Scott Shad. The airport saw 7.9 million passengers in 2019.

An upgrade could result in the next two years “if the current passenger recovery trend and traffic levels are sustainable — supporting an improved market position assessment — and financial metrics remain consistent with a strong financial risk profile, incorporating enhanced flexibility provided by the use of $131.5 million in U.S. Department of Transportation operating grants,” Shad said.

If passenger levels — also known as enplanements — trends weaken materially or remain unpredictable due to lingering effects of the pandemic, the outlook will revert back to stable, S&P warned.

“S&P’s latest rating affirms that St. Louis Lambert International Airport is moving in the right direction. The change to a positive outlook points toward continued growth and investor interest,” St. Louis Comptroller Darlene Green said in a statement. The airport has $529 million of debt outstanding.