CHICAGO -- Airport debt solely secured by passenger facility charges would be unlikely to achieve an investment-grade rating of Baa or above, according to a policy statement released yesterday by Moody's Investors Service.

Moody's pointed out that while Congress intended to allow airports to collect the $1 to $3 charges per enplaned passenger and leverage the revenues for bonds, "the ability of the Federal Aviation Administration to terminate an airport's passenger facility charge authority poses a significant uncertainty to potential investors."

Rob Wigington, a senior vice president of governmental and legal affairs for the Airports Association Council International, a key proponent of the facility charges, said the Moody's statement would lead to further talks and possible legislative changes aimed at eradicating rating agency concerns.

"We will continue talking to the rating agency folks and certainly if it comes down to the need to make legislative changes, we will certainly consider that," Mr. Wigington said.

Moody's policy statement on the charges followed a similar report issued by Standard & Poor's Corp. last December that also raised concerns about the creditworthiness of bonds backed by the facility charges.

Andrea Bozzo, a senior vice president at Fitch Investors Service, said yesterday that Fitch would be reviewing bonds backed by passenger facility charges on a case-by-case basis.

Adam Whiteman, a vice president a Moody's pointed out that under the law passed by Congress in 1990, the FAA has the ability to terminate an airport's ability to levy the charge for a number of reasons.

These include: if construction on projects funded with passenger facility charges is not started within two years of the FAA's approval of the charges; if the FAA decides the revenue from the charges is not properly being used; or if the airport violates the Airport Noise and Capacity Act of 1990.

"If an investor puts money down and has to risk that sometime in the future the FAA will come and pull the revenue stream and there is nothing else to back up the bonds, it is a problem," Mr. Whiteman explained.

Moody's reported that about 50 airports are taking steps to levy passenger facility charges.

Mr. Whiteman said that given the concerns raised about backing bonds solely with revenues from the passenger charges, many airports are trying to structure double-barrel bond issues, using general airport revenues in conjunction with passenger facility charge revenues. However, Moody's warned that due again to the FAA's ability to terminate the charges, the agency could not view the bounds as true double-barrel bonds, meaning the security for the bonds would rest on the general revenues alone.

The agency added that using passenger facility charges as a junior lien on a bond issue "would at best be a neutral credit factor" and that this type of enhancement could be a negative credit factor to outstanding airport debt because the sale of debt predicated on future revenues from the charge would reflect an additional claim on the existing system revenues," if the charge were no longer in place.

Officials at both Moody's and Standard & Poor's said they expect a $250 million revenue bond issue for McCarran International Airport In Las Vegas to be the first to be rated with a passenger facility charge component.

Ross Johnson, the airport's assistant director in charge of finance, said the issue, which will be sold in August, would incorporate a double-barrel security tapping general airport revenues. The FAA has approved a $3 passenger facility charge at the airport that will raise $428 million over 30 years, according to Mr. Johnson.

Other bond deals waiting in the wings include a $315 million issue for Stapleton International Airport in Denver to be sold in September. Janet Ross, an analyst/investor at the airport, said that it has not been determined whether the bonds would be backed solely by passenger facility charge revenues or a combination of the fees and other airport revenues. Stapleton expects to collect $2.4 billion in passenger facility fees over a 33-year period, Ms. Ross said.

The Metropolitan Nashville Airport Authority expects to receive approval Oct. 1 from the FAA to assess a $3 passenger facility charge, according to Doug Wolfe, vice president of finance for the authority.

The authority expects to raise $150 million over the next 12 years and plans to issue to a total of $105 million bonds to finance runway and taxiway projects, Mr. Wolfe said. He added that the authority is looking into backing the bonds solely with passenger facility charge revenues or a combination of passenger facility charge revenues and other airport revenues.

Mr. Wigington said that a number of airports have taken a wait-and-see attitude on issuing bonds with the charges with the hope federal authorities can calm rating agency fears.

John Haupert, treasurer of the Port Authority of New York and New Jersey, said that while the authority has applied to the FAA for a $3 charge that would raise $6.4 billion over 35 years, there are no immediate plans to issue bonds secured by the charges over the next two years.

He explained that once the rating agency concerns over the bonds are "sorted out," the authority would issue bonds backed by the charges alone or in a double-barrel approach.

Earlier this month, the use of the charges at airports in Minneapolis-St. Paul and Memphis was challenged by Northwest Airlines in federal court. Mr. Whiteman said such legal challenges could make it more difficult for airports to seek double-barrel security for bonds if airlines that oppose the charges must approve the use of an airport's general revenues to supplement a bond issue backed by the charges.

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