DALLAS — The Port of Seattle will upgrade equipment at Seattle-Tacoma International Airport and refinance several series of outstanding debt with proceeds from next week’s negotiated sale of $394.6 million of intermediate-line revenue bonds.
The tranche includes $369.4 million of private-activity revenue bonds and $25.3 million of government revenue bonds.
The schedule calls for a retail period on July 14 and an institutional sales period on July 15.
Morgan Stanley is the senior underwriter. Others on the underwriting team are Barclays Capital, Goldman, Sachs & Co., and Siebert Brandford Shank & Co.
The bonds are rated A-plus by Standard & Poor’s and Aa3 by Moody’s Investors Service.
Fitch Ratings has not released its report on the debt, but currently rates the port’s outstanding debt AA.
The Port of Seattle’s bond counsel is K&L Gates LLP. The financial adviser is Seattle-Northwest Securities Corp.
Elizabeth Morrison, the port’s senior manager for corporate finance, said the issue would provide $170 million of new money to finance $145 million of projects at Sea-Tac Airport.
“We have a capital program, but the work being financed by this issue is mostly renewal and replacement of elevator and escalator equipment at the airport,” Morrison said. “Some of these units are 30 years old or more, and the maintenance costs were more becoming more than the cost of replacing them.”
The total is higher than the project costs to fund a reserve account and for capitalized interest, she said.
The total amount of the refunding could change to reflect market conditions, according to Morrison.
“We have a target of 3% savings with the refundings, so if the market is favorable we could increase the amount,” she said. “The ones we have listed are those for which we have a high degree of confidence.”
The port is also refunding some variable-rate debt with proceeds from next week’s sale.
“We’re not doing the refunding of the variable-rate debt because of savings, but to replace an existing line of credit,” Morrison said.
Port officials did consider issuing the $25.3 million of government revenue bonds as Build America Bonds, but rejected the option.
“It was a very small piece of the overall issue, so we decided to issue it as plain-vanilla municipal debt,” Morrison said.
The port currently has $1.5 billion of outstanding senior-lien bonds, $540.8 million of intermediate-lien bonds, $575.0 million of subordinate-lien bonds, and $138.8 million of commercial paper.
Other outstanding debt includes $200.2 million of revenue bonds supported by the airport’s passenger facility charges, $126.9 million of special facility revenue bonds for Sea-Tac’s Terminal 18, and $105.5 million of bonds that financed the airport’s fuel distribution system.
The port has a $2.1 billion capital plan through 2016, primarily to finance expansion and modernization of the airport. The program will be financed in part with $554 million of revenue bonds, not including the current issue.
The Port of Seattle also operates a major marine port facility. The airport accounts for 73.1% of the port’s annual revenue.
