KBRA assigns a long-term rating of A+ to the City of Chicago, Illinois (the City), Chicago O’Hare International Airport (O’Hare or the Airport) Senior Lien Revenue and Revenue Refunding Bonds Series 2026B (AMT), Senior Lien Revenue Refunding Bonds Series 2026C (Non-AMT), and Senior Lien Revenue Refunding Bonds Series 2026D (Non-AMT). Concurrently KBRA affirms the long-term A+ rating on the City’s approximately $11.4 billion of outstanding Senior Lien Airport Revenue Bonds (GARBs) issued for O’Hare. The Outlook is Stable.

Proceeds of the Series 2026B Bonds will be used 1) pay or reimburse the City for the cost of certain projects at O’Hare; 2) refund certain outstanding Senior Lien Bonds; 3) make the required deposit to the common debt service reserve fund; 4) fund capitalized interest on the Series 2026B Bonds; 5) pay costs of issuance; and 6) to the extent insured, pay the premium for a bond insurance policy. Proceeds of the Series 2026CD bonds will be used to 1) refunding certain outstanding Senior Lien Bonds; 2) repurchase and cancel by means of a tender offer certain other outstanding Senior Lien Bonds; 3) pay the costs of issuance; and 4) to the extent insured, pay the premium for a bond insurance policy.

The City’s GARBs are secured by a first lien pledge of Net Revenues derived from the operations of O’Hare and certain funds and accounts maintained under the Senior Lien Indenture. The Series 2026D Bonds are further secured by a subordinate pledge of passenger facility charge (PFC) revenues. O’Hare is owned by the City and operated by the Chicago Department of Aviation (CDA). The City accounts for O’Hare as an enterprise fund separate and distinct from Chicago Midway International Airport (Midway), which the City also owns and operates through the CDA. Thus, bonds issued for O’Hare have no claim on the revenues generated at Midway, and vice versa.

Key Credit Considerations

The rating was assigned because of the following key credit considerations:

Credit Positives

  • Strong, diverse, expansive air trade area supporting origination and destination (O&D) activity and the nation’s largest dual-hub.

  • Adequate debt service coverage and sound liquidity, underpinned by a residually based airline use and lease agreement (AULA).

  • The expected efficiency, capacity and competitive benefits gained with the completion of the ORDNext capital improvement program.

Credit Challenges

  • With approximately 55% of ORDNext yet to be funded, the City remains exposed to various financing and execution risks for the remainder of the program.

  • Exceptionally high ($20.1 billion, FY 2032) pro-forma leverage, reflective of the City’s extensive investments in O’Hare, resulting in very high projected airline costs.

Rating Sensitivities

For Upgrade

  • Sustained growth in passenger activity and related revenues leading to materially lower airline costs.

  • Moderating leverage metrics through amortization of existing debt load and/or limited future issuance

For Downgrade

  • Issuance of GARBs beyond what is currently contemplated, leading to diminished financial flexibility.

  • While unlikely, a sustained loss in passenger volume and revenues due to a significant retrenchment of one or both of the Airport’s leading carriers.

To access ratings and relevant documents, click here.

Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

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