S&P downgrades rating of KCI bonds

By Dennis Boone

The long-term rating and underlying rating (SPUR) of Kansas City, Mo.'s senior general airport revenue bonds issued for Kansas City International Airport as well as the SPUR on 2019A-C airport special obligations bonds were recently lowered by S&P Global Ratings, creating a negative outlook.

S&P Global Ratings lowered its long-term rating and underlying rating (SPUR) on Kansas City, Mo.’s senior general airport revenue bonds (GARBs), issued for the Kansas City International Airport (MCI), to ‘A-‘ from ‘A’ and also lowered its SPUR on Kansas City’s series 2019A-C airport special obligations bonds, issued for MCI, to ‘A-‘ from ‘A’ and removed the ratings from CreditWatch, where they had been placed with negative implications on Aug. 7, 2020. At the same time, S&P Global Ratings assigned its ‘A-‘ rating to MCI’s combined pro forma $557.4 million series 2020A-B airports special obligation bonds and its pro forma $71.3 million series 2020C airport special obligation refunding bonds. The outlook is negative.

The ratings on MCI, along with many other U.S. airport ratings, was previously placed on CreditWatch to reflect the material negative impact of the COVID-19 pandemic on traffic levels, expected financial performance metrics, and overall credit quality.

“The rating action and negative outlook reflect our expectation that activity levels at MCI will be depressed or unpredictable, or demonstrate anemic growth due to the COVID-19 pandemic and associated effects outside of management’s control,” said S&P Global Ratings credit analyst Kevin Archer. “In our view, the severe drop in demand has diminished MCI’s overall credit quality and will likely pressure financial metrics relative to historical levels. We view this precipitous decline not as a temporary disruption with a relatively rapid recovery, but as a backdrop for what we believe will be a period of sluggish air travel demand that could extend beyond our rating outlook horizon.”

Proceeds of the sale of the series 2020A-C bonds will be used to fund portions of the airport’s ongoing terminal replacement project; refund in full the outstanding amount of series 2013A GARBs for interest savings without extending maturities; provide capital interest until the new airport terminal opens, which is expected for the first quarter of 2023; and make a deposit to the debt service reserve.