BRADENTON, Fla. — Miami-Dade County, Fla., next week is pricing $524 million of tax-exempt aviation revenue bonds in what is expected to be the last major financing for Miami International Airport’s $6.49 billion capital improvement plan.
Proceeds will be used to finish MIA’s north terminal renovation and expansion and other airport improvements, reimburse the county for funds already spent, pay capitalized interest up to 18 months, and pay issuance costs.
The deal, the third for the airport this year, is also being brought to market to take advantage of the holiday from the alternative minimum tax offered by the federal stimulus legislation, which expires at the end of this year.
“We have noticed a marked improvement in retail sales” because of the ability to sell non-AMT bonds, said Anne Syrcle Lee, chief financial officer for the county’s aviation department overseeing MIA.
The bonds are expected to price Tuesday and Wednesday with JPMorgan as the book-runner.
While the final structure will be determined at pricing, the serial bonds are expected to mature between 2012 and 2030. There may be as many as three term bonds, maturing in 2030, 2035, and 2041.
“This issue brings the overall debt profile to level debt starting in 2018,” Lee said. “We have been offered $300 million in bond insurance, and we are considering it as long as it is cost effective.”
The bonds are rated A by Fitch Ratings, A2 by Moody’s Investors Service, and A-minus by Standard & Poor’s.
All three rating agencies affirmed their ratings on approximately $5.6 billion of outstanding parity debt and said the outlook is stable.
Analysts noted that MIA has a high debt burden and cost per enplaned passenger, but it also has a conservative financial profile with no variable-rate bonds or swaps.
According to Standard & Poor’s, projected payments per enplaned passenger will more than double to $33.65 in 2018 when enplanements total 20.6 million. That is up from $15.98 in 2009 when enplanements were about 16.9 million. After next week’s sale, the airport’s debt per enplaned passenger will be about $373 based on fiscal 2009 enplanements.
Offsetting some credit concerns about the airport’s high debt is its resiliency in the current recession and its highly competitive position as the gateway to Latin America and the Caribbean.
Over the past year, travel levels have been largely unchanged and the airport’s anchor carrier, American Airlines, continues to demonstrate “solid support” for its hub and even plans additions in flights and seating capacity later in 2010, said Fitch analyst Seth Lehman.
The airport served approximately 16.9 million enplaned passengers in fiscal 2009, reflecting almost no change from the previous year and virtually the same passenger levels of a decade ago.
“The more recent traffic trends are notably impressive given the reduction in traffic and capacity seen at many other U.S. airports since the middle of 2008,” Lehman said. “For the first seven months in fiscal 2010, MIA traffic is ahead by 1.2% over the same period in the prior year.”
Underpinning international travel at MIA is its proximity to Latin America, which has economic and cultural ties to Miami.
Moody’s noted that the airport traffic forecast has been revised based on better results for 2010 than were forecast in December. Rather than a 2.2% decline in fiscal 2010, enplanements are now projected to increase by 1.1% followed by growth of 3.3% in fiscal 2011, 2.7% in 2012, then tapering off through 2018 to an average just below 2.5%.
Based on the traffic forecast, the debt-service coverage ratio is projected to range from 1.23 times to 1.29 times in compliance with the rate covenant, Moody’s said.
Fiscal 2009 operating revenues were down 3.6% but were largely offset by a 2.9% decrease in operating expenses. The airport is in the midst of a 20% staff reduction by 2012 and has eliminated 209 positions to date. The unrestricted cash position was $221 million in March compared to $196 million at the end of fiscal 2009 and $236 million in fiscal 2008.
Located on 3,230 acres near downtown Miami, the airport last year served 34 million arriving and departing domestic and international passengers, which was down only 0.52% from 2008.
The years-long CIP, which is now drawing to a close, includes renovating and expanding the terminal to more than seven million square feet from 3.5 million. The central and south terminal areas have been renovated and expanded, while completion of the north terminal is scheduled for the fall of 2011. Work continues on a new baggage-handling system that has been delayed because of problems.
A new fourth runway has been built while improvements to cargo and parking facilities have been completed. A central rental car facility recently opened while a people mover system between the rental car facility and terminal is still under construction.
Approximately 82.8% of the CIP budget, $5.37 billion of $6.49 billion, has been spent while 56.6% of projects are completed and 40.2% are under construction, according to Moody’s.
Lee said investors should be comforted by the fact that airport officials have controlled and timely delivered the CIP over the last five years.
Funding sources for the CIP include approximately $5.5 billion in proceeds from the issuance of bonds, $345 million in U.S. Department of Transportation grants, an estimated $336 million in Federal Aviation Administration airport improvement program grants, $169 million in passenger facility charge revenues on a pay-as-you-go basis, $105 million in contributions by American Airlines for north terminal improvements, and $76 million in Transportation Security Administration grants for security-related costs.
Of the more than $4 billion spent on terminal renovation and expansion, the north terminal project is projected to cost $2.9 billion. Most of it will be for American Airlines and its affiliate American Eagle, which serve about 70% of the enplaned passengers at MIA.
The financial advisers for next week’s sale are First Southwest Co. and Frasca & Associates LLC.
Along with JPMorgan, the syndicate is composed of Barclays Capital, Estrada Hinojosa & Co., Goldman, Sachs & Co., Jackson Securities, Loop Capital Markets LLC, Morgan Keegan & Co., M.R. Beal & Co., Morgan Stanley, Ramirez & Co., RBC Capital Markets, Rice Financial Products Co., Siebert Brandford Shank & Co., and Wells Fargo Securities.
Squire, Sanders and Dempsey LLP and KnoxSeaton are co-bond counsel. Hunton & Williams LLP and Thomas H. Williams Jr. are co-disclosure counsel. Underwriters are represented by GrayRobinson PA.
