Chicago O'Hare International Airport is looking to borrow about $476 million from the municipal bond market as it undergoes a multi-billion dollar overhaul.
The city plans to borrow on behalf of O'Hare to support terminal redevelopment and capacity enhancements at the airport as new routes and flights are added to one of the busiest US airports, according to preliminary bond documents. The bonds, which are expected to price on Wednesday, will support O'Hare's roughly $12 billion capital plan, which has gone over the original $8.6 billion budget first laid out in 2018.
The plan includes redeveloping and adding new terminals, as well as new transport between concourses and baggage handling systems. The terminal area plan is expected to be completed in 2033.
Chicago's chief financial officer declined to comment on the sale.
The sale comes as O'Hare's two dominating hub airlines, United Airlines Holdings Inc. and American Airlines Group Inc., are embroiled in a turf war, fighting for increased gate space and flights at one of the world's busiest airports. United announced at the end of January that the airline is adding new routes and increasing flying from Chicago. The announcement came a few days after American added new routes from Chicago and Los Angeles that overlapped with United.
O'Hare's location in the Midwest has made it a key connecting hub for the region. In 2024, O'Hare had 40 million passenger enplanements, compared to roughly 17 million enplanements in Detroit, according to bond documents.
"The fact that folks are willing to really pinch and claw each other so much, kind of speaks to the really high position that the airport does have in the aviation market," said Kevin Archer, an analyst at S&P Global Ratings.
The conflict has had little impact on the airport's credit grades, though S&P is keeping a close eye on if it will impact the airport's operating expenses, operating revenues, cash flow and debt issuance. The ratings firm assigned the airport revenue bonds an A+ rating and a stable outlook Friday.
The timing of the sale could be an advantage, according to Jamie Iselin, managing director at Neuberger Berman. While the airport issues debt frequently, supply may be light given the holiday-shortened week, likely giving it good traction with investors. The overall performance of airport debt also contributed to his upbeat view on the sale.
"If you like the sector, you're actually going to be able to get opportunities to invest, which is not as consistent in some other sectors where maybe issuance is a little bit more infrequent," Iselin said.
Airports borrowed at a record rate last year, with several of the deals oversubscribed. Many airports across the country are also returning, or even exceeding, prepandemic levels of travel. The travel boom, coupled with aging infrastructure at airports means we'll continue to see strong issuance in the sector this year, according to Joe Pezzimenti, an S&P analyst.
The deal is led by Jefferies, Cabrera Capital Markets and Loop Capital Markets.