United bankruptcy could lead to ratings downgrade. (News Briefs).
United Airlines' Chapter 11 bankruptcy filing could eventually
lead to a credit rating downgrade on tax-exempt bonds issued for
United's hub airports. Although the bankruptcy filing does not
itself pose a default risk to airport bonds, Fitch Ratings pointed our
that the airline's forced reorganization could put downward
pressure on the bond ratings. This reorganization will likely entail
service cutbacks at United hubs as the airline attempts to cut costs.
Since the municipal bonds are revenue bonds, the cutback in service
affects the bonds' revenue streams and therefore the risk
associated with the bond. Although Fitch has not yet downgraded United
airport bonds, the rating agency did place airport revenue bonds issued
for San Francisco International Airport on rating watch negative.
Officials at airport authorities in Denver, Washington, and Chicago have
assured investors they have nothing to fear. (Source: The Bond Buyer,
December 10, 2002)