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JFK Airport Seeks $1.5 Billion in Bonds for New Terminal Expansion

JFK Airport Seeks $1.5 Billion in Bonds for $9 Billion Terminal Project, Completion Expected by 2030

By Max Weldon

6/11, 12:52 EDT
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Key Takeaway

  • JFK Airport seeks $1.5 billion in municipal bonds to support its $9 billion New Terminal One project, slated for completion by 2030.
  • Moody’s and Fitch rate the upcoming debt issue just above junk status, highlighting the high risk but strong demand due to JFK's busy status.
  • U.S. airports need $151 billion in upgrades by 2027, driving a surge in municipal bond issuance; Chicago also plans significant bond sales for O’Hare and affordable housing projects.

JFK Seeks Funds for New Terminal

John F. Kennedy International Airport is seeking additional funds to support the construction of its New Terminal One, joining a wave of airports tapping into the bond market for infrastructure upgrades. The public-private partnership managing the project plans to offer debt next week to refinance part of the $6.6 billion bank loan taken out in 2022. In November, $1.5 billion in bonds were initially offered to begin the project, but the deal was upsized to $2 billion due to high demand. When this debt trades, it often does so at premium prices.

The New Terminal One project, described as the largest single-asset project financing in U.S. history, is expected to cost $9 billion for its first phase. This phase is slated for completion by June 2026 and will add four gates to the existing 10, along with a new arrivals and departures building. The entire terminal, which will feature 23 gates and cover 2.6 million square feet, is scheduled for completion in 2030.

Moody’s Ratings and Fitch Ratings have assigned the upcoming debt issue a grade just one level above junk status. Byron Anderson, head of fixed income at Laffer Tengler Investments, commented, “With barely an investment grade rating at BBB- this shows the upfront risk and debt involved in these massive terminal projects. The good news is that JFK is one of the busiest airports in the US and demand should stay high.”

Demand for Airport Bonds

U.S. airports require $151 billion in infrastructure upgrades through 2027, according to Airports Council International-North America. This need has contributed to a surge in municipal bond issuance, which has increased by more than a third over last year’s pace to $205 billion. The demand for airport bonds is strong, driven by the need to address aging infrastructure and the anticipated recovery in air travel.

Eric Kazatsky, an analyst at Bloomberg Intelligence, noted, “Issuers have shown a willingness to tap the muni markets en masse. Demand will help take the sting” from any increase in borrowing costs. This sentiment is echoed by the robust economic data, including strong May jobs growth, which has led Fed watchers to postpone their call for the first rate cut.

One concern for airport bond buyers is the level of international enplanements, which are revenue-generating passengers departing from or arriving at JFK. The new terminal will be solely devoted to international travel. Although international enplanements have not yet returned to pre-Covid levels, Moody’s expects them to fully recover by the opening of Phase A.

Chicago's Airport and Housing Bonds

Chicago is also seeking approval to issue several billion dollars in bonds to modernize O’Hare International Airport and convert office buildings into affordable apartments. The city council’s finance committee has approved plans to issue up to $3 billion in general airport senior lien revenue bonds and passenger facility charge revenue bonds for O’Hare’s capital improvements. These bonds will be a mix of new money and refinancings, with transactions planned from July through November.

Additionally, the committee approved a bond sale worth up to $400 million to refinance the city’s water system and $150 million in multi-family housing revenue bonds to increase affordable housing in the central business district. The city’s improved ratings provide potential cost savings through refinancings.

Chicago Mayor Brandon Johnson aims to address the rising vacancies in office buildings in the Loop by converting them into affordable apartments. The finance committee approved proposals for up to $70.5 million for the conversion of 208 S. LaSalle Street and up to $88 million for 111 W. Monroe Street.

Street Views

  • Byron Anderson, Laffer Tengler Investments (Cautiously Optimistic on JFK New Terminal One project):

    "With barely an investment grade rating at BBB- this shows the upfront risk and debt involved in these massive terminal projects. The good news is that JFK is one of the busiest airports in the US and demand should stay high."

  • Eric Kazatsky, Bloomberg Intelligence (Neutral on muni market borrowing costs):

    "Issuers have shown a willingness to tap the muni markets en masse. Demand will help take the sting from any increase in borrowing costs."

  • Tom Kozlik, Hilltop Securities Inc. (Bullish on airport sector):

    "US airports are generally upgrading their infrastructure because they’re experiencing and are expecting to continue to experience increased enplanements and usage... Travel in the US is changing, and that will generally result in higher enplanements."