DALLAS — Amid a $500 million remodeling project, Dallas Love Field Airport won a two notch upgrade from Standard & Poor’s Wednesday, rising to A with a stable outlook from BBB-plus.
“The stable outlook is based on our view of Love Field’s very low debt burden and very strong liquidity,” said credit analyst Todd Spence.
The renovation of Love Field is not adding to the city of Dallas’ debt because Southwest Airlines, the major tenant, is issuing the tax-exempt debt through a conduit issuer.
Spence noted Love Field’s strengths, including a strong unrestricted cash position at fiscal year-end 2010 of about $67 million, representing 945% of outstanding debt and a low debt burden, with debt per enplanement at about $2 in fiscal 2010. All of the city’s debt for the airport matures this year.
“Given our understanding that management has no additional debt plans and since the bonds mature in 2011, we do not expect to change the rating during the two-year outlook period,” Spence wrote.
Southwest last year issued $310 million of airport revenue bonds for the remodeling project under the conduit Love Field Modernization Corp. The project is expected to be completed in 2014, the year that Southwest can begin unrestricted nonstop service from the airport. Currently, Southwest can only fly nonstop to cities in Texas and nearby states.
The remodeling debt carries the airline’s rating of BBB from Standard & Poor’s with a negative outlook and Baa3 from Moody’s Investors Service with a stable outlook.
Dallas’s revenue bonds for Love Field, issued in 1996, carry ratings of BBB-plus with a stable outlook from Fitch Ratings.