The Los Angeles International Airport (LAX) faced a setback as Fitch Ratings affirmed the junk status of the private activity bonds issued for its multi-billion-dollar people mover project. The speculative-grade BB-plus rating on the senior lien revenue bonds was maintained for the project developed by LAX Integrated Express Solutions (LINXS). This came after the completion date of the public-private project was extended by another six months. The project, which is 96% complete, requires further testing after its construction is finished. However, Fitch Ratings warned in January that if airport officials failed to reach an agreement with the development team on schedule relief and compensation claims, the bonds’ rating could see a further downgrade.
Project Timeline and Consequences
Initially, the project had faced delays with the opening being pushed from June to April 2025. However, Fitch’s recent report revealed that the opening date has been further postponed to October 30, 2025. This delay poses a risk of default under the financing agreements if the project does not meet the lenders’ longstop date. The project’s current timeline is crossing the lenders’ and partnership agreement longstop dates, which raises concerns about potential default. Fitch analysts highlighted the importance of reaching an agreement on schedule relief claims to avoid the risk of default due to breaching the longstop date.
Financial Stability and Risk Mitigation
The technical advisor involved in the project has certified that the passenger service agreement date will occur before the lenders’ longstop date, a critical condition for drawing on the design-build loan. To alleviate financial pressure, LINXS has expressed willingness to utilize the sponsor’s equity contribution earlier than the scheduled date. This proactive approach aims to ensure timely payments to the design-build contractor, thereby avoiding defaults due to non-payment and breach of the credit agreement. Once the project is operational, Fitch Ratings anticipates a strong credit profile supported by a revenue-paying grantor and strict operating standards.
The Los Angeles International Airport’s people mover project faces significant challenges in meeting its construction timeline and financial obligations. The delays and financial struggles associated with the project underscore the importance of effective project management and collaboration between stakeholders. As the completion date approaches, it is crucial for airport officials and the development team to swiftly resolve any outstanding issues to safeguard the project’s financial stability and ensure its successful implementation.