Regional News

Miami-Dade Sets $600M

BRADENTON, Fla. - Miami-Dade County next week will hold a two-day pricing of $600 million of aviation revenue bonds.

The Series 2008 A bond proceeds will support Miami International Airport's $6.2 billion capital improvement plan. Approximately $497 million of bond proceeds will be used to refund commercial paper notes and finance projects in the CIP, $71.5 million will be capitalized interest, $19.5 million will be deposited to a reserve account if a surety bond is not used, and about $12 million will go for various costs of issuance.

Some $435 million of the offering is subject to the federal alternative minimum tax. The AMT portion of the deal and the remaining $165 million of non-AMT bonds are expected to mature between 2016 and 2041 with serial and term bonds to be determined at pricing, said Anne Syrcle Lee, chief financial officer for the Miami-Dade Aviation Department.

Lee described the offering as "a plain-vanilla, fixed-rate issue." She also said insurance bids are higher than previous airport transactions and the county's finance team is evaluating insurance on a maturity-by-maturity basis. First Southwest Co. and Frasca & Associates LLC are co-financial advisers.

Banc of America Securities LLC is the book-runner of a 14-member syndicate that will conduct retail pricing on Tuesday and institutional pricing on Wednesday.

"Given that the issue is predominantly AMT, [the investors] will be mostly institutional buyers," Lee said, adding that those include property and casualty insurance companies, money managers, hedge funds, tender-option bond programs, and bond funds. "We expect strong retail participation from Florida investors on the non-AMT bonds."

Next week's deal is rated A, A2, and A-minus by Fitch Ratings, Moody's Investors Service, and Standard & Poor's, respectively. All three assign stable outlooks to the debt and Miami-Dade's outstanding aviation revenue bonds. The county has approximately $3.9 billion of outstanding parity debt.

As with prior issuances, the bonds will be repaid through landing fees and other revenues from airport operations. The county has airline use agreements with 83 airlines.

Miami International saw 33.7 million domestic and international passengers in 2007, an increase of 3.71% over the prior year. As of the second quarter of this year, the airport offered 121 domestic and international destinations and is considered a gateway to Latin America and the Caribbean. In calendar 2007, MIA was the number-one U.S. airport for international freight and the third-largest U.S. airport for international passengers, according to the Airports Council International.

American Airlines accounted for approximately 64.1% of enplaned passengers in fiscal 2007 and, with its affiliate American Eagle, accounted for 68.6%. Although the airport has a diverse number of airlines, analysts have said American's market dominance raises credit concerns.

AMR Corp., American's parent company, reported a net loss of $328 million for the first quarter compared to a net profit of $81 million during the same period in 2007. Rising aviation fuel prices contributed significantly to losses, with the company paying $665 million more for fuel in the first quarter of 2008 than it did last year, according to bond documents.

Additionally, AMR recently announced that it plans to sell or spin off American Eagle but county aviation officials said in bond documents that they do not believe such a sale would materially affect passenger volume or service, which most likely would be picked up by other carriers.

The Miami-Dade deal comes as Standard & Poor's last week placed many airlines on CreditWatch with negative implications, including American. The agency cited "potential severe financial damage from unprecedented high jet fuel prices" as its top reason for its negative outlook on the airline industry.

Lee said on Tuesday that it was "too early in the pre-marketing" of the 2008 bonds to determine what affect airline rating changes might have on potential investors.

The airport's close proximity to Fort Lauderdale International Airport and a complex CIP that has experienced cost increases in materials and labor also concern analysts. However, they noted that Miami International has experienced gains in enplanement activity over forecasts and it benefits from sound financial management.

"We expect that the county will continue to prudently manage the capital improvement plan and contain increases to the CIP budget, while also limiting increases to additional indebtedness above current estimations," said Standard & Poor's analyst Joe Pezzimenti. "We also expect that air travel demand will remain sound, despite potential service reductions by American Airlines or other carriers."

Joining Banc of America on next week's deal are Butler Wick & Co., Estrada Hinojosa & Co., Goldman, Sachs & Co., JPMorgan, Jackson Securities, Lehman Brothers, Loop Capital Markets LLC, Merrill Lynch & Co., M.R. Beal & Co., Raymond James & Associates Inc., Rice Financial Products Co., Siebert Brandford Shank & Co., and Wachovia Bank NA.

Greenberg Traurig PA and Edwards & Associates PA are co-bond counsel. Hogan & Hartson LLP, McGhee & Associates LLC, and Jose A. Villalobos PA are co-disclosure counsel. Weiss Serota Helfman Pastoriza Cole & Boniske PL and Moskowitz, Mandell, Salim & Simowitz PA are co-underwriters' counsel.



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