Clark County, Nev.’s McCarran International Airport on Wednesday night received a downgrade from Moody’s Investors Service to A1 from Aa3 on about $3 billion of its $4.5 billion of debt just as it prepares to market $365 million in three series on May 30.
The downgrade affected the airport’s subordinate-lien ratings, but the outlook for all the bonds was revised to stable, according to the Moody’s report.
“The downgrade of the subordinate-lien and Jet A bonds is based on the marked rise in airline cost per enplanement and narrowing of the subordinate-lien debt-service coverage ratio as a result of increasing debt service requirements,” Moody’s analysts said.
The new issues to be sold by the county for the airport include $180 million of Series 2012A-1 bond anticipation notes, $120 million of Series 2012A-2 Bans, and $65 million of Series 2012B revenue refunding bonds.
RBC Capital Markets is the lead underwriter on Series 2012-A, Bank of America Merrill Lynch is lead on Series 2012A-2 and Citi is lead on the revenue refunding bonds.
All are refinancings as the notes and bonds come to maturity, according to Joe Piurkowski, the airport’s acting assistant director of finance.
Randall Walker, Clark County’s director of aviation, said, “With McCarran’s passenger and revenue numbers trending upward in recent months, we were surprised but understanding of Moody’s cautious outlook during this ongoing recovery period. It’s worth noting that Moody’s chose to reaffirm the airport’s senior-lien bonds’ Aa2 rating, and revised each of our other bond categories from negative watch to stable.”
Standard & Poor’s has maintained its ratings for all four of the bond categories, and has reclassified those to stable from negative watch, according to Walker.
“McCarran’s senior-lien ratings remain among the highest for U.S. airports,” he said. “Some upcoming financing measures will allow the airport to take advantage of historically low interest rates to refund existing [passenger facility charge] bonds, and roll $300 million in outstanding notes for one year.”
Moody’s downgraded to A1 from Aa3 the $3.05 billion of subordinate-lien debt and debt secured by PFCs for the airport. It also downgraded to A2 from A1 the airport’s ratings on $89.4 million of third-lien debt, including the Jet A fuel tax bonds. The Aa2 rating on the $1.03 billion of outstanding senior-lien bonds is affirmed.
Analysts also assigned an A1 rating to the new bonds, including $65 million of Series 2012B PFC refunding revenue bonds. They assigned a MIG-1 rating to $180 million of Series 2012A-1 and $120 million A-2 airport system junior subordinate-lien revenue notes.
The Jet A bonds are negatively affected by the reduced level of excess revenues, as well as much narrower coverage of the bonds by only Jet A tax receipts, which have been declining in tandem with enplanements since the 2007 peak, the report said.