Denver International Airport's South Terminal includes a 519-room Westin Hotel and station for a commuter rail line.

DALLAS — Moody's Investors Service has improved the outlook on Denver Airport Enterprise's A1 rating to stable from negative.

The rating affects $3.72 billion of airport system revenue bonds. Moody's also affirmed the A2 rating on $719 million of subordinate revenue bonds.

Moody's has held a negative outlook on airport enterprise debt for Denver International since March 28, 2011, citing investments in what analysts called non-aviation related projects such as a hotel and depot for a commuter rail line.

"The rating is negatively pressured by the increased leverage to pursue non-aviation related projects such as the connection to the new light rail system and on-site hotel," analyst Earl Heffintrayer wrote in Moody's June 19 revision. "In the case of the transit connection, the operations will compete long-term with on-airport parking, which is a key revenue driver and contributor to excess coverage outside of the airline use agreement."

The train station and 519-room Westin hotel are included in the South Terminal Project that will link DIA to downtown Denver via rail in 2016.  The hotel is expected to open in 2015. The Regional Transportation District is building the rail line as part of its $4.7 billion FasTracks project.

Successful completion of the project on budget and hotel revenues at or above baseline forecast with debt service coverage above 1.75 times on a Moody's net revenue basis could place positive pressure on the rating, analysts said.

However, A marked increase in senior lien debt through capital program overruns that results in lower debt-service coverage ratios, any significant service reductions from the three major airlines at the airport, or significant variations in costs per enplanement versus projections could put downward pressure on the rating, they noted.

"The stable outlook reflects our view that enplanements should continue to remain steady as large operational realignments in the airline industry appear unlikely, that future debt funded capital improvements will be less than the principal payments on outstanding debt resulting in reduced leverage over the current capital plan," Heffintrayer wrote.


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