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