KBRA assigns its BBB- preliminary rating to JFK NTO, LLC’s proposed $6.63 billion financing for phase A of the Terminal One redevelopment project, also called New Terminal One (NTO), at New York’s John F. Kennedy International Airport (JFK). The Outlook is Stable. The financing plan consists of a single five-year term loan with two tranches totaling $6.33 billion along with 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 conduit issuer, and subsequently on-lent to JFK NTO, LLC (the borrower). Funding will also include $2.33 billion of sponsor equity (backed by LCs).

This design-build-operate-and-maintain project at Terminal One—JFK’s only exclusively international terminal—is the first stage of a wider redevelopment plan for the airport. The project operates 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 executed with Tishman Construction Corporation of New York (the DB contractor) for Phase A of NTO, which encompasses a $5.7 billion brownfield redevelopment of the terminal. Existing Terminal One is a 700,000-sf international-only terminal at JFK accommodating approximately 7 million passengers each year in a space originally designed to accommodate half that amount. The current terminal has 10 gates, nine wide-body (twin-aisle aircraft Boeing 767, 777, 787, and Airbus 300 series), and one narrow body. Phase A of New Terminal One will provide a 1.7 million-sf terminal with 13 wide-body contact gates and one temporary widebody gate. Under the scope of the agreement, the New Terminal One facility will be built on the sites of the existing Terminal Two and former Terminal Three. The construction plan has been designed to minimize disruptions and allow Existing Terminal One to continue to operate through 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), which will provide consulting, technical services, and staff training prior to 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 case, we expect the project to have average debt service coverage ratios (DSCR) of 2.15x through the term of the lease, and discounted cash flow to debt ratios of above 1x at each planned refinancing point. The rating and the Stable Outlook reflect the project’s contractual structure, the DB contractor’s experience, and substantial liquidity from payment and performance bonds during the design and construction term.

Once operations have been transferred to New Terminal One, debt for the project will primarily be repaid by aeronautical revenues consisting of facility charges expressed as costs per enplanement (CPE) by the user airlines.

KBRA analyzed the transaction using its Project Finance Global Rating Methodology, published on January 19, 2021, and its ESG Global Rating Methodology, published on June 16, 2021. KBRA will review the final financing documents, operative agreements, and legal opinions for the transaction prior to closing.

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

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Related Publications

• Project Finance Global Rating Methodology
• ESG Global Rating Methodology

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

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.

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