DALLAS - Kemper Securities Inc. continues to recommend that its retail customers avoid Denver International Airport bonds, saying uncertainties remain that may affect repayment on $2.7 billion in outstanding bonds.

In a six-page report issued. last week, the firm cautioned risk-averse investors against buying the city-issued bonds, citing critical factors ranging from timely completion and final project cost to the ability to maintain the level of traffic needed to repay bondholders.

"We do recognize the progress the city of Denver has made, but we feel like there are things that make this still unsuitable for [retail] investors," said Mark Webber, assistant vice president at the Chicago-based brokerage and author of the report.

Richard Ciccarone, senior vice president and head of municipal research, added, "I think you are looking at 41 % of the project complete and you are looking at a high cost [of operation] in a competitive environment even though there are benefits to Denver as a hub. "

Kemper, the only brokerage that regularly issues advisories on the nation's largest airport project, has been advising its retail customers against investing in the bonds for two years.

Project spokeswoman Janet Ross said that while the feasibility consultants lowered their own traffic estimate to 16.5 million from 17 million passengers before the final construction bond sale last month, city officials see no reason to change their projections.

As for the Kemper report, Ross, an analyst, said, "We haven't seen it and I can't really respond to it."

The report says future traffic at the new airport is the most critical issue affecting debt repayment and notes that the lack of a second hubbing airline "could be a catalyst for unmanageable airline costs."

Kemper says that with Continental Airlines now under bankruptcy court protection, the new airport could open in late 1993 with only Chicago-based United Airlines using the airport for its hubbing, or national transfer traffic.

"We believe Denver's loss of total enplanements could range from all to half of Continental's transfer traffic," the report says, noting that Atlanta lost 30% of all its traffic after Eastern Airlines was liquidated.

"Regardless, under a one-hub scenario, we believe Denver's total enplanements could drop to anywhere from 85% to 95% of the current levels," the report says.

While feasibility projections show adequate coverage for airport debt under the one-hub scenario, Kemper said that lower-than-expected traffic levels, higher final project costs, and deficiencies in concessions and other non-airline revenues could by 1995 push the cost of operating at Denver above $20 per enplaned revenue passenger.

"What we are saying is that the cushion the feasibility study alludes to is not quite as large," Webber said. Kemper did not estimate what kind of coverage bondholders could expect under their scenario.

The implication by Kemper that the cost could rise above the $20 level is a serious one. Under agreements with both United and Continental, the airlines have the legal right to terminate their leases at the airport if charges pass that level.

While Wall Street analysts believe the one-hub scenario is likely, they do not expect the project cost to hit the $20 level, as calculated in 1990 dollars.

"We feel okay with the one-hub scenario," said Andrea Bozzo, senior vice president at Fitch Investors Service, which rates the bonds BBB-minus. "But certainly there's lots of room for different opinions."

Adam Whiteman, assistant vice president at Moody's Investors Service, which rates the bonds Conditional Baal, added, "I'm not sure that breaching the $20 mark is a probable scenario. "

Even if it does, few expect United to give up a monopoly situation.

"I don't think their goal would be to walk away," said Todd Whitestone, managing director at Standard & Poor's Corp., which rates the bonds BBB. "I think they would want to extract more from the city. United is excellent at negotiating. I think that's why Denver wants to make sure that never happens."

For instance, Mr. Whitestone said United could pressure the city to make concessionaires pay more of the cost of the airport. Or, he said, the airline might seek to have its facilities built with debt backed by all airport revenues rather than with special facilities bonds secured by lease payments from the carrier.

Kemper addresses the probability that United would have a monopoly at the new airport, saying that the carrier may be willing to pay more than $20 per enplaned revenue passenger for its franchise. But the brokerage also advises that "the costs that any airline would bear to retain a monopoly position are finite. "

In a telephone interview, Kemper's Webber said that many in the market believe a United monopoly, while not necessarily good for consumers, would be a plus for the airport and bondholders.

"I feel from talking to many other people that they feel if United is on board, then debt service is okay," he said. "But there are numerous examples that monopolies don't necessarily guarantee a company profitability. "

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