Official Statement Airport Commission City and County of San ...

Each of Moody’s, Standard & Poor’s and Fitch (collectively, the “Rating Agencies”) has downgraded the
claims-paying ability and financial strength ratings of most of the nation’s monoline bond insurance companies and
many other financial institutions. The Rating Agencies could announce changes in rating outlook, or a review for
downgrade or further downgrades of bond insurers, or credit or liquidity providers. Such adverse ratings
developments with respect to bond insurers or credit or liquidity providers could have a material adverse effect on
the Airport, including without limitation as a result of substantial increases in the Airport's debt service-related costs.
For example, the Airport is in the process of replacing existing surety bonds provided by bond insurers whose
claims-paying ability ratings are below investment grade with cash. See “SECURITY FOR THE 2010A BONDS–
Reserve Fund; Reserve Account Surety Bonds–Pooled Reserve Account,” “–Airport Market Access” and
“AIRPORT’S FINANCIAL RELATED INFORMATION–Current and Future Financings.”
In addition, such downgrades of credit or liquidity providers or swap counterparties, particularly below
investment grade, could result in termination or events of default under swap agreements or credit or liquidity
facilities. Payments required under these agreements in the event of any termination could be substantial and could
have a material adverse impact on the liquidity position of the Airport. See “AIRPORT’S FINANCIAL AND RELATED
INFORMATION–Interest Rate Swaps.”
A default by any of these financial institutions under its bond insurance, debt service reserve fund,
liquidity or interest rate swap obligations could have a material adverse impact on Airport finances and its ability
to issue debt to purchase or redeem the Mandatory Tender Bonds.
Variable Rate Debt and Credit and Liquidity Provider Downgrades
The Rating Agencies have downgraded the claims-paying ability and financial strength ratings of a number
of the nation’s monoline bond insurance companies, including insurers of one or more series of Outstanding Bonds
of the Airport and/or providers of related debt service reserve fund surety bonds and/or swap insurance policies with
respect to Outstanding Bonds. It is possible that the Rating Agencies could issue additional statements leading to a
change in rating outlook, a review for downgrade or downgrades or further downgrades of the bond insurers that
have already been downgraded or of other bond insurers or credit enhancers. The Airport’s exposure to the credit of
downgraded bond insurers or credit enhancers could have negative effects on the Airport’s debt portfolio. In
addition to an increase in the interest rates on variable rate Bonds secured by the subject bond insurers or credit
enhancers, such downgrades, especially downgrades to below investment grade could lead to termination events or
other negative effects under related agreements including, but not limited to, swap agreements and liquidity
facilities, letters of credit and/or reserve fund surety policies. Payments required under these agreements in the
event of any termination could be substantial and could have a negative impact on Net Revenues and/or the liquidity
position of the Airport. See also “AIRPORT’S FINANCIAL AND RELATED INFORMATION–Interest Rate Swaps.”
Seismic Risks
The Airport is located in a seismically active region. The San Francisco Bay Area has experienced several
major and numerous minor earthquakes. The largest was the 1906 San Francisco earthquake along the San Andreas
fault with an estimated magnitude of 8.3 on the Richter scale. The most recent significant seismic event was an
earthquake measuring 7.1 on the Richter scale that occurred in October 1989.
The Airport could sustain extensive damage to its facilities, including to the control tower, in a major
earthquake from ground motion and possible liquefaction of underlying soils and resulting tidal surges. Damage
could include pavement displacement (which could, in the worst case, necessitate the closing of one or more
runways for extended periods of time), distortions of pavement grades, breaks in utilities, loss of water supply from
the City’s Hetch Hetchy water system, drainage and sewage lines, displacement or collapse of buildings, rupture of
gas and fuel lines (including the common carrier pipelines under the San Francisco Bay that supply jet fuel to the
Airport), and collapse of dikes at the Airport with consequential flooding. See “SAN FRANCISCO INTERNATIONAL
AIRPORT–Current Airport Facilities–Seismic Design of Airport Facilities.”
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