DIA Great Hall Problems Won’t Hurt Airport Credit Rating, Analyst Says
Denver International Airport's sudden termination of a $1.8 billion contract in the middle of construction won't hurt the airport or the project's bond rating, according to Fitch Ratings, a bond ratings agency.
“Denver is one of the nation's largest airports that has a strong revenue risk profile based on robust airline activities and sound airline agreement terms to recover all costs," Seth Lehman, a director at Fitch Ratings, said in a statement.
Officials at Denver International Airport announced Tuesday it had terminated the contract of Great Hall Partners over safety concerns and disagreements over design, cost and delays on the project. The project was projected to be years behind schedule and millions over budget.
Great Hall Partners, a joint venture between Ferrovial Airports, Saunders Construction and JLC Infrastructure, won the right to remodel the interior of the main terminal. The project was launched to move security off the main floor, and open up the hall, so travelers would feel more comfortable hanging out in the terminal, spending money at shops and restaurants.
The 34-year contract gave Great Hall Partners rights to manage and collect a portion of the revenue from the retail in the hall long after construction was done.
“Denver will no longer have to share a portion of the concession revenues generated at the main terminal, " said Lehman. "And will also retain longer-term flexibility to manage concessions across the entire terminal and multiple concourses serving commercial passengers.”
Great Hall Partners has disputed the airport's portrayal of events leading up to the termination of the contract, pointing the finger at DIA management for significant and poorly timed design changes. The contractor also maintains that weak concrete in the original construction of the airport was a legitimate cause of delay and cost.
Airport leaders are confident they can deliver the project for roughly the same cost as originally budgeted with a new contractor. Great Hall Partners must clear out of the site and hand it over by mid-November.
"Denver faces cost and time exposures in order to replace the contractor and proceed with the redevelopment," Lehman said.
"Looking ahead, Fitch will monitor the steps taken to effectuate the termination of the partnership and the sources of funds to cover related cost."
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