KBRA gives a preliminary rating of BBB- on JFK NTO, LLC’s $6.63 billion financing for the JFK Terminal 1 redevelopment


NEW YORK–(BUSINESS WIRE)–KBRA provides its preliminary BBB rating to JFK NTO, LLC’s proposed $6.63 billion financing for Phase A of the Terminal One, also known as New Terminal One (NTO) redevelopment project at New York’s John F. Kennedy International Airport (JFK) . The Outlook is stable. The financing plan consists of a single five-year loan and two tranches totaling $6.33 billion with the local development company as the conduit issuer and then on-lent to JFK NTO, LLC (the Borrower). The funding also includes $2.33 billion in sponsorship equity (backed by LCs).

This design-build-operate-and-maintenance project at Terminal One – JFK’s only international terminal – is the first phase of a broader redevelopment plan for the airport. The project is being operated under a lease with the Port Authority of New York and New Jersey (PANYNJ) which is being extended pending financial close on December 30, 2060.

A design-build (DB) agreement for Phase A of NTO, which includes a $5.7 billion redevelopment of the terminal, is executed with Tishman Construction Corporation of New York (the DB contractor). The existing Terminal One is a 700,000 sf international terminal at JFK that accommodates approximately 7 million passengers each year in an area originally designed for half that amount. The current terminal has 10 gates, nine wide-body aircraft (Boeing 767, 777, 787 and Airbus 300 series twin-aisle aircraft) and a narrow body. Phase A of the new Terminal One will provide a 1.7 million sf terminal with 13 widebody contact gates and one temporary widebody gate. As part of the agreement, the new Terminal One will be built on the sites of the existing Terminal Two and the former Terminal Three. The construction plan was designed to minimize disruption and allow the existing Terminal 1 to continue operating until the completion of Phase A in 2026.

The Borrower will manage New Terminal One in conjunction with Ferrovial Airports US Operation and Management Services LLC (Ferrovial Airports), who will provide pre and post financial close consulting, technical services and staff training. The project is led by a consortium consisting of Carlyle, Ferrovial, JLC Infrastructure and Ullico (collectively the Sponsors).

Per KBRA’s rating case, we expect the project to have an average debt service coverage ratio (DSCR) of 2.15x over the lease term and a discounted cash flow to debt ratio of over 1x at each projected refinancing point. The rating and stable outlook reflect the project’s contractual structure, DB contractor’s experience and significant liquidity from payment and performance guarantees during the design and construction period.

Once operations have been transferred to the new Terminal 1, the debt for the project will be repaid primarily through aviation revenue, which consists of facility fees expressed as a cost per aircraft (CPE) by the user airlines.

KBRA analyzed the transaction based on its Global valuation methodology for project financereleased January 19, 2021, and its Global ESG Rating Methodologyreleased on June 16, 2021. KBRA will review the final financing documents, operational agreements and legal opinions for the transaction prior to closing.

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

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