KBRA Assigns Preliminary Rating BBB- to JFK NTO, LLC’s $6.63 Billion Financing for JFK Airport Terminal 1 Redevelopment

NEW YORK–(BUSINESS WIRE)–KBRA assigns its preliminary BBB- rating to the $6.63 billion financing proposed by JFK NTO, LLC for Phase A of the Terminal One, also known as New Terminal One (NTO), redevelopment project at the airport international John F. Kennedy of New York (JFK). The outlook is stable. The financing plan consists of a single five-year term loan with two tranches totaling $6.33 billion, as well as a $200 million liquidity facility, a $50 million working capital facility and a $50 million security deposit facility to be borrowed by New York Transportation Development Corporation, a local development corporation, as intermediary issuer and then on-lent to JFK NTO, LLC (the borrower). The funding will also include $2.33 billion in sponsor equity (backed by LCs).

This design-build-operate-maintain project at Terminal One, JFK’s only international-only terminal, is the first step in a larger airport redevelopment plan. The project is operated under a lease agreement with the Port Authority of New York and New Jersey (PANYNJ), which will be extended through December 30, 2060, at financial close.

A design-build (DB) agreement will be signed with Tishman Construction Corporation of New York (the DB contractor) for NTO’s Phase A, which includes a $5.7 billion brownfield redevelopment of the terminal. The existing Terminal 1 is a 700,000 square foot international terminal at JFK that can accommodate approximately 7 million passengers annually in space originally designed to accommodate half that amount. The current terminal has 10 gates, nine widebodies (Boeing 767, 777, 787 and Airbus 300 twin-aisle aircraft) and one narrow body. Phase A of the new Terminal 1 will provide a 1.7 million square foot terminal with 13 widebody contact doors and one temporary widebody door. As part of the agreement, the new Terminal One will be built on the sites of the existing Terminal Two and the old Terminal Three. The construction plan has been designed to minimize disruption and allow the existing Terminal 1 to continue operating until Phase A is completed in 2026.

The Borrower will manage the new Terminal 1 in conjunction with Ferrovial Airports US Operation and Management Services LLC (Ferrovial Airports), which will provide advisory services, technical services and staff training before and after financial close. The project will be led by a consortium formed by Carlyle, Ferrovial, JLC Infrastructure and Ullico (collectively, the Sponsors).

Under KBRA’s rating scenario, we expect the project to have average debt service coverage ratios (DSCRs) of 2.15x over the lease term, and discounted cash flow to debt ratios above 1x at each planned refinancing point. The stable rating and outlook reflects the contract structure of the project, the experience of the DB contractor and the substantial cash flow from payments and performance bonds over the design and construction period.

Once operations are transferred to the new terminal one, the project’s debt will be mainly repaid by aeronautical revenues made up of installation charges expressed as costs per boarding (CPE) by the user airlines.

KBRA has analyzed the transaction using its Global Project Finance Rating Methodology, released on January 19, 2021, and its Global ESG Rating Methodology, released on June 16, 2021. KBRA will review the final financing documents, operational agreements and legal opinions for the transaction. before closing.

The preliminary rating is based on information known to KBRA at the time of this publication. Information received after this press release could result in the awarding of a final score that differs from the preliminary score.

Click here to see the report. To access relevant notes and documents, click here.

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Further information on key credit considerations, sensitivity analyzes that consider factors that may affect these credit ratings and how they could lead to an upgrade or downgrade, and ESG factors (where they are a key factor in changing the credit rating or rating outlook) can be viewed in the full rating report mentioned above.

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Additional information relating to this rating metric is available in the information disclosure form(s) referenced above. Additional information regarding KBRA’s policies, methodologies, grading scales and disclosures is available at www.kbra.com.

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Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the United States Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a rating agency with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a rating agency with the UK Financial Conduct Authority under the temporary registration scheme. In addition, KBRA is designated as the Designated Rating Agency by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a credit rating provider.

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