SAN FRANCISCO - The Clark County, Nev., airport system took off this week with a refinancing designed to clear its books of variable-rate debt impaired by the fallout from the subprime mortgage crisis.
The system, which includes McCarran International Airport, the nation's sixth-busiest in passenger traffic, had auction-rate debt that reset at high rates when the auction-rate securities market came unglued, as well as variable-rate demand obligations with liquidity facilities that carried an insurance backstop, meaning the debt became contaminated by the troubles of most monoline bond insurers.
About $600 million of new subordinate-lien, variable-rate debt closed this week, according to Randall Walker, the county director of aviation.
"As you know, the market's been really odd," Walker said, noting that, prior to the refinancing, the airport system's uninsured variable-rate bonds traded better than those with insurance.
"Which is really odd," he said, "because the probability of getting paid is the same."
The airport refunded its auction-rate bonds and variable-rate demand obligations with liquidity facilities into VRDOs with letters of credit.
The transactions affected several outstanding swaps, and the airport system had to terminate and restructure two others, Walker said. The county was ahead on one and behind on the other, resulting in no real out-of-pocket costs to terminate them, he said.
Walker said McCarran did not face difficulty obtaining LOCs.
"We got into the market real soon, and were really lucky," he said, "I think were getting ours converted quicker than most people."
Citi, JPMorgan, and UBS Securities LLC were remarketing agents.
The rating agencies have affirmed their long-term underlying ratings of the airport system's revenue bonds. Moody's Investors Service affirmed its Aa2 rating for senior-lien revenue bonds at Aa3 rating for the subordinate-lien bonds; Fitch Ratings affirmed its AA-minus senior-lien rating, and A-plus rating for subordinate-lien revenue bonds and passenger facilities charge revenue bonds, for which a fixed-rate refunding is in the works; and Standard & Poor's affirmed its AA-minus rating for the senior lien and A-plus ratings for the subordinate-lien and PFC bonds.
The bonds, which come in an array of series and subseries, also carry enhanced long-term ratings and short-term ratings based on the LOCs, which are provided by Landesbank Baden-Wuerttemberg and Bayerische Landesbank, according to rating reports.
