In a grim sign for potential airport deals out of Latin America, Moody's Investors Service cut the underlying public rating of the outstanding US$198.9 of notes due 2012 issued by the concessionaire of Chile's main airport, SCL Terminal Aereo Santiago. In a press release, the agency also raised the specter of a default down the road and subsequent trigger on an MBIA insurance policy. "Whenever there's a default in an asset category it may cast a pall on the entire sector," said Jeffrey Stern, a partner at Thacher Proffitt & Wood. "It may also reduce the appetite of the insurers."

This was the third time the stand-alone rating fell. Initially at Baa2, the December 1998 transaction dropped to Ba1 in December 2001, Ba3 in April of this year and B3 last week. Thanks to the MBIA wrap, investors - mostly buy-and-hold types in the U.S. - have nothing to worry about since the actual rating remains AAA from Moody's as well as Fitch Ratings. Salomon Smith Barney led the transaction in late 1998. The spread came at 237.5 basis points over Treasurys.

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