Moody's Investors Service has downgraded to A2 from A1 the City of Chicago O'Hare International Airport's third lien general airport revenue bonds (GARBs) and affirmed the A2 rating on the airport's outstanding Passenger Facility Charge (PFC) bonds. We have also assigned an A2 rating to the airport's General Airport Senior Lien Revenue Refunding Bonds Series 2012A-E and PFC Revenue Refunding Bonds Series 2012A&B. Additionally we have also withdrawn the ratings on the airport's outstanding First Lien GARBs and expect to withdraw the ratings on the outstanding second lien GARBs once they are fully redeemed through this bond issue.

The outlook on all bonds remains stable.

SUMMARY RATING RATIONALE

The downgrade is based on the airport's high leverage and narrow financial margins as it navigates difficult economic and industry environments and the construction risk inherent in its large capital construction plan. The collective risks associated with the weak national economic growth, the bankruptcy status of American Airlines, and the large O'Hare Modernization Program (OMP) are more appropriate to the A2 rating category given the airport's financial margin's and liquidity position.

The rating outlook for all GARB and PFC bonds is stable and is based on our expectation that enplanements, debt per origination and destination (O&D) passenger, and cost per enplanement (CPE) will remain at or near forecasted levels. The stable outlook also recognizes the experience of the airport staff in financing and delivering large capital projects that helps offset construction risk and the airport's decision to strengthen debt service reserve funds with cash as part of this transaction. Furthermore, the airport's decision to consolidate debt into the senior lien adds stability to the rating.

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