DALLAS -- Fitch Investors Service yesterday lowered its rating on revenue bonds for the new Denver International Airport to BBB-minus from BBB because of continual delays in the airport's opening and the escalating costs of the project.

The rating agency gave its lowest investment-grade rating to $3.2 billion of outstanding bonds as well as to $225 million of airport revenue bonds scheduled to be sold Aug. 30. The new bonds will carry project financing through next March and finance the building of a backup baggage system.

In addition, all bonds have been retained on FitchAlert with negative implications until the new airport is open and fully operational.

City officials have now set the airport's opening date for Feb. 28 at the latest after they complete a conventional baggage system to back up a flawed automated system that has been blamed for several delays in opening the airport and for the cost increases.

In announcing the downgrade, Fitch pointed to several problems, including the escalation of project costs to $3.2 billion, or $18.41 per passenger. Those costs will have risen to $3.45 billion when the new revenue bonds are issued next week via a syndicate led by Lehman Brothers.

In addition, problems have emerged with the two dominant hub carriers. United Airlines, which has about a 60% market share, is still negotiating with the city on a final agreement for a baggage-handling system. Continental Airlines, which has had financial troubles, has substantially curtailed flights from Denver.

Fitch said in a release: "Continental Airlines is downsizing its operations at Stapleton, which further pressures project economics. The delay additionally increases opportunities for legal disputes over rates and charges and acceptance by United of an unautomated baggage system."

However, Amy Doppelt, a Fitch analyst, said many credit fundamentals remain solid, including a strong demand for origination and destination air service in Denver and United's interest in serving the region. "We stayed in investment grade because you have a project that is complete except for the baggage system," she said.

Patricia Schwartzberg, Denver's revenue manager, said she was disappointed by the downgrade. But, she said, "It is still an investment-grade rating, and I believe that the long-term credit story is an improving one. And once we open, the rating will go back up again."

Schwartzberg said the sale of 30-year airport revenue bonds, some serial and some term, still is planned for Aug. 30 and preliminary official statements have been mailed out. Of the $225 million in bonds, $123 mtilion would go for capitalized interest to pay bondholders through March. About $51 million would pay for the additional baggage system and $51 million would replenish reserve funds.

Other rating agencies are scheduled to release their ratings on the bond issue by today or later this week. Moody's Investors Service rates the outstanding bonds a conditional Baa. Standard & Poor's Corp. rates the bonds BB

or junk grade, with a developing outlook.

Meantime, Denver city officials are working toward the opening of the airport by Feb. 28 at the latest, even if a more conventional baggage system is used and modifications to the flawed automatic baggage system are not completed.

"We will not wait past Feb. 28. It is the outside date," said Briggs Gamblin, spokesman for Denver Mayor Wellington Webb. "But we would look at opening before that if we are ready and United Airlines is ready."

Under the terms of an agreement reached Monday between the city and United Airlines, the Chicagobased carrier would work in coming months on modifying the troubled automated baggage system that loses and damages bags.

Concurrently, Denver officials would work with a Michigan firm to design a more conventional baggage system that was suggested last month to back up the high-tech baggage handler.

Gamblin said the city and United made a general agreement Monday to work on the parallel baggage system and the city council approved the deal late Monday evening. However, a final agreement still must be reached in coming days.

The city already has started work with Rapistan Demag Corp. of Grand Rapids, Mich., to construct the conventional baggage system following council approval of a $26.37 million contract with the firm on Monday. Gamblin said the alternative system could be completed by late January or early February.

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