CHICAGO -- Standard & Poor's Corp. assigned an A-minus rating yesterday to $280 million of passenger facility charge revenue bonds that McCarran International Airport in Nevada plans to sell next week.
While the bond issue will mark the first by an airport to use the passenger facility charge revenues to secure debt, Standard & Poor's said it does not view revenues from the charges "as a viable stand-alone security for ultimate debt service payment."
Instead, the agency based the rating on the airport's ability to increase its other revenues to cover debt service if necessary.
Last Friday, Moody's Investors Service assigned an A rating to the issue, but also made it clear that rating was based on the pledge of the airport system's net revenues and not on the passenger facility charges alone.
Both agencies have voiced concerns over the last several months about securing debt with revenues from the $1 to $3 charge per enplaned passenger. For example, Moody's in a June report said airport debt, secured solely with revenues from the charges, would be unlikely to achieve an investment-grade rating of Baa or above.
The major concern has been the ability of the Federal Aviation Administration to terminate the charges at a given airport.
"That's the reason why we're not counting the passenger facility charges as the ultimate security on the bonds due to the provision that they can be removed [by the FAA] if the airport is not complying with [FAA] guidelines," explained Ernest Perez, a director at Standard & Poor's, referring to the McCarran Airport bond issue.
For that issue, Standard & Poor's said the rating was based on the airport's legal requirement to increase general airport rates and charges if the passenger facility charges are terminated, Mr. Perez said. He added that the airport already has approval from airlines at the airport to increase revenues to meet debt service requirements on the bonds if needed.
The McCarran Airport bonds are scheduled to be priced Thursday in a deal headed by Smith Barney, Harris Upham & Co. Airport officials did not return phone calls.
Congress approved the passenger facility charges and the ability of airports to leverage the revenues for bonds in 1990. Airport group officials have said they may seek changes in the law from Congress to ease rating agencies' concerns.
In a related action, Standard & Poor's removed $523.3 million of McCarran Airport's senior lien revenue bonds, Series 1982, 1983, and 1988, from CreditWatch with negative implications and affirmed an A rating with a negative outlook for the debt.
The debt had been placed on CreditWatch in July 1991 when America West Airlines Inc. filed for bankruptcy. In a press release, the agency said the removal from CreditWatch was due to the airline being current on the fees and charges it owes the airport and because other airlines have picked up America West's service.
