DENVER -- Standard & Poor's Corp. said yesterday that it may downgrade Denver International Airport revenue debt to non-investment grade pending a meeting with Denver officials in New York City early next week.
"Based on information provide at that meeting, the airport's rating could be lowered possibly to a non-investment grade level shortly thereafter," Standard & Poor's said.
On Monday, Denver delayed opening Denver International indefinitely pending successful operation of the troubled automated baggage system.
"The recent announcement to delay the airport's opening indefinitely because of operating problems with the $193 million baggage handling system highlights Standard & Poor's concerns with the project's ability to ensure full and timely payment of the debt service on about $3 billion of debt," the agency said.
Trading of Denver airport bonds, which strengthened slightly early yesterday, was strangely quiet as traders digested the news.
The only quote on traders' screens for most of yesterday was for a $2 million block of 6 3/4% coupon, alternative minimum tax bonds maturing in 2022, priced at 90 5/8 to yield 7.55%. The same bond yielded 7.70% Friday.
Moody's Investors Service, which was expected to make an announcement about a possible downgrade yesterday, postponed its action until today, a spokesman said.
Fitch Investor Service yesterday placed $2.7 billion of $3.5 billion in Denver airport revenue debt on Fitch Alert with negative implications. The debt that was not affected was older debt or backed by a bank letter of credit.
Denver revenue manager Patricia Schwartzberg said that future financing plans will depend on the rating agencies. Denver planned a late July refinancing of $180 million in 1985 airport revenue bonds plus a possible $50 million new-money issue for capital improvements.
Regarding Standard & Poor's announcement, she said, "None of that is a surprise. We knew that we had the possibility of being downgraded to that level."
Schwartzberg said she will probably meet with Standard & Poor's officials next Tuesday.
"We're going to give it all we've got and wait and see what happens," she said, adding that a non-investment grade rating would make it "very difficult to sell new bonds."
Todd Whitestone, director and lead analyst on Denver International for Standard & Poor's, stressed that a decision on whether to rate the credit BBB-minus -- investment grade -- or BB-plus -- non-investment grade -- depends on the city's presentation on Tuesday.
"We're looking for an understanding from them they're going to pay for a delay cost and how smoothly the airport will run even after the opening," Whitestone said in a telephone interview.
He cautioned the bond market against assuming the debt will be non-investment grade.
"What [Tuesday's announcement] reflects is a very serious concern. We're certainly not predicting it will end up non-investment grade. We're not ruling it out at this point in time," Whitestone said.
Whitestone's Standard & Poor's colleague, analyst Ernie Perez, said, "We are really concerned over the impact of this [delay] both financially and from the operational standpoint."
Moody's and Standard & Poor's credit committees met all day Monday and yesterday.
Fitch analyst Andrea Bozzo said she wants to see how the delay is resolved and how it is paid for. Fitch is looking for a solid date so that the agency can calculate the exact costs of the delay and its effects on airport revenue.
United Airlines, the major hubbing airline in Denver, has agreed to pay $8 million cash a month for three months for the delay. The delay costs $33 million a month, before netting $17 million in revenues from Stapleton Airport.
Denver also plans to use reserve funds to pay the approximately $8 million left for the three months.