The ratings reflect a highly leveraged facility balanced against a resilient demand profile given the project's location at JFK, the nation's most dominant and largest international gateway, and the project's strategic importance to Delta Airlines (rated B/Stable).
"It is our opinion that the proposed expansion will strengthen Terminal 4's competitive position at JFK and the market for international traffic within the air trade area and across Delta's system,"noted Standard & Poor's credit analyst Joseph Pezzimenti. He added, "Our rating is based on the fundamental demand for this facility and is not directly linked to the credit rating of any single tenant, including Delta."
In our view, an airline bankruptcy will not necessarily result to a rating downgrade for this project as long as demand for the facility remains strong and airline tenants including Delta continue operations. To the extent we view a tenant bankruptcy as potentially and negatively impacting service levels or creating the potential for a lease rejection or renegotiation, the project rating is likely to be lowered.
The bonds are limited obligations of PANYNJ, secured solely by a pledge of JFK International Air Terminal facility rental payments that are equal to debt service. The rental payments come solely from project revenues after operating and maintenance expenses and authority senior ground rental payments. The company is required under the lease to deposit all debt service payments directly with the bond trustee. A debt service reserve funded with bond proceeds also secure the bonds.
We understand that the series 8 bond proceeds will be used to help finance the expansion of Terminal 4 to accommodate the relocation of Delta's mainline international and certain mainline domestic JFK operations from Terminal 3 to Terminal 4. Delta will lease a minimum of 12, and a maximum of 16, of Terminal 4's 25 aircraft gates on a preferential basis. JFK International Air Terminal will continue to serve contract carriers at the remaining gates, ensuring that the entire facility is utilized.
