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MOODY'S RELEASES POLICY STATEMENT ON AIRPORT PASSENGER FACILITY CHARGES; 'STAND ALONE' PFC DEBT UNLIKELY TO ACHIEVE INVESTMENT GRADE RATING

MOODY'S RELEASES POLICY STATEMENT ON AIRPORT PASSENGER FACILITY CHARGES;
    'STAND ALONE' PFC DEBT UNLIKELY TO ACHIEVE INVESTMENT GRADE RATING
    NEW YORK, June 15 /PRNewswire/ -- Moody's Investors Service today released a policy statement on airport passenger facility charges (PFCs) highlighting credit concerns over the use of these charges to leverage debt.  In describing its policy on PFC debt, Moody's indicated that debt secured solely by PFCs would be unlikely to achieve an investment grade rating of "Baa" or above.  The policy statement, entitled "Passenger Facility Charges:  Public Policy vs. Investor Risk", is part of the series Perspectives on Airport Credit Analysis, which covers current topics in the airport industry.
    According to Adam Whiteman, vice president and head of the Airport Specialty Group, "Not since the deregulation of the U.S. airline industry has any single legislative action had the potential to shape the direction of the aviation industry and in particular commercial service airports as has the Aviation System Capacity Act of 1990.  With the Passenger Facility Charge provisions of the Act, Congress has laid the groundwork for the funding of much needed infrastructure improvements at U.S. airports either on a pay-as-you-go basis or through bonding."
    Whiteman also said that, "While Congress' intent is to use the PFC revenue stream to leverage debt, the ability of the Federal Aviation Administration (FAA) to terminate an airport's PFC authority poses a significant uncertainty to potential investors.  Recently the FAA has indicated that it would move to terminate eligibility for PFCs at two airports that were in the process of applying for PFCs and which were proposing local regulations that were in conflict with federal policies. Moody's is reluctant to predict how future administrations will use the PFC termination provision.  Thus, anything short of elimination of the existing termination provision would probably preclude us from placing an investment-grade rating on long-term, stand-alone, PFC-supported debt."
    In Moody's view the use of PFCs to enhance other airport debt -- for example by using projected PFC revenues to help secure a junior lien general airport revenue bond -- would at best be a neutral credit factor.  Moody's noted, however, such an issue if structured poorly, could have negative implications for the rating of the airport's outstanding general airport revenue bond debt.
    -0-             06/15/92
    CONTACT:  Adam J. Whiteman, vice president, 212-553-7809, or Robert J. Miller, 212-553-4947, both of Moody's IN:  AIR ST:  NY -- NY052 -- X595  06/15/92
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Publication:PR Newswire
Date:Jun 15, 1992
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