Philadelphia International Airport's revenue bonds received a one-notch downgrade to its underlying rating from Standard & Poor's, which cited a "relatively weak liquidity position."
S&P cut the rating to A from A-plus on Aug. 10. An A long-term rating was also assigned by S&P to Philadelphia's proposed series 2015A airport revenue refunding bonds scheduled to be issued by the city of Philadelphia on Aug. 12. The ratings agency affirmed its triple-A/A-minus rating on the airport's $131.2 million of outstanding parity variable-rate demand bonds series 2005C. The city of Philadelphia operates the airport, which ranks 19th in total U.S. passengers and is a major northeast hub for American Airlines.
"The downgrade reflects our assessments of Philadelphia's additional borrowing plans; high carrier concentration; moderately high exposure to connecting traffic; marginal Standard & Poor's-adjusted debt service coverage; and relatively weak liquidity position, and moderately high airline cost structure," said S&P credit analyst Joseph Pezzimenti in a statement.
Pezzimenti said the airport has obtained approval for $173 million in additional projects from a new five-year airline use and lease agreement, but this was not enough to offset its existing challenges. He added that liquidity is expected to stay at weak levels to "contain increases to its airline cost structure."
Philadelphia's 2015A airport revenue refunding bonds were assigned an A2 rating by Moody's Investors Service and rated A by Fitch Ratings. Moody's and Fitch also affirmed their A2 and A ratings, respectively, on an estimated $1.2 billion in outstanding revenue bonds.