LAX Bond Debt Put on List for Possible Rating Downgrade
Moody’s Investors Service placed Los Angeles International Airport’s $232 million in bond debt on its Watchlist on Monday for a possible rating downgrade, underscoring the precarious financial situation of airports in the wake of the terrorist attacks.
The decision--which could lead to a downgrade of the revenue bonds’ premium Aa3 rating in the next three months--was prompted by restricted access to the central terminal area and other security measures that have led to plummeting parking and concession revenues over the last three weeks, Moody’s Senior Vice President Adam Whiteman said.
Whiteman said other major airports across the country are likely to join LAX on the list later in the week. However, a Moody’s statement released Monday portrayed the airport as particularly troubled.
“LAX has been negatively affected by the current stringent security measures more than any other U.S. airport, with the exception of National Airport in Washington,” the statement said.
Airports across the country have been battered by reduced travel and steep security costs since the Sept. 11 attacks. Standard & Poor’s placed all its North American airport ratings on CreditWatch the week before last.
Moody’s, however, has taken an airport-by-airport approach. Before Monday, it had placed debt only for Ronald Reagan National Airport and Boston’s Logan International Airport on its Watchlist, along with other bonds backed solely by airline ticket fees, Whiteman said.
The addition of LAX bond debt--which is serviced with general revenues such as landing, concession and parking fees--points to an increasingly grim assessment as the tragedy trickles through the economy.
In the last week, for example, several air carriers have indicated they might have trouble making timely payments of landing fees to airports. Last week, Northwest Airlines fell $5.5 million behind on rent and landing fee payments to Minneapolis-St. Paul International Airport, but made the payment late Friday.
At LAX, two carriers have asked for a grace period or a waiver of landing fees, said Los Angeles World Airports Chief Financial Officer Karen L. Sisson.
The LAX revenue bonds were issued over the last decade to pay for a wide range of capital projects, including parking structure 6 and the mezzanine at Tom Bradley International Terminal, agency spokesman Paul Haney said.
The airport has more than $300 million in cash reserves, but some is restricted and can’t be used for debt service, Haney said. The facility takes in about $1.1 million a day in fees and spends just less than $1 million, Sisson said.
“Obviously, right now, we’re in basically the same position the airlines are in--we’re experiencing very large demand on our cash and we don’t have a lot of cash coming in the door,” she said.
The $15-billion bailout approved for airlines has left airports less sympathetic to requests for waivers, according to airport officials, who are themselves seeking federal relief.
The Moody’s warning, Haney said, “underscores the significant problems facing the airport industry and the need for federal emergency assistance.”
The airports make bond payments twice yearly and have set aside funds for the November payment, Haney added.
