The Port Authority of New York and New Jersey on Thursday approved a $1.2 billion expansion of a terminal at John F. Kennedy International Airport on behalf of Delta Air Lines and its partners.
The authority would act as a conduit issuer for JFK International Air Terminal LLC, which would likely go to market this year with about $900 million of bonds secured by lease payments. Under the plan, Delta would vacate Terminal 3, out of which it currently handles international traffic. The airline would move that traffic into an expanded Terminal 4, which would add nine newly built passenger gates to its existing 16 gates.
In addition to bond proceeds, the expansion would use $75 million of equity from Delta, $215 million of passenger facility charges, and federal funding.
The Port Authority issued $934 million of bonds on behalf of JFKIAT in 1997 to build Terminal 4. At the time, JFKIAT was a partnership between Schiphol USA, LCOR, and Lehman Brothers. Schiphol is a Dutch firm that operates an airport in Amsterdam and LCOR is a U.S.-based real estate development and investment firm. The defunct Lehman is no longer a partner. Delta would be a tenant of JFKIAT and would operate at the expanded terminal under a 30-year agreement.
The expanded terminal is expected to be completed in 2013.
The Port Authority calls the debt special project bonds, which designates it as conduit debt. The agency has issued five series of special project bonds since 1983. The authorization gives the obligor the option of marketing the bonds in one or two series.
Port Authority treasurer Anne Marie Mulligan said the timing and structure of the deal has not been determined but it was likely to price before the end of the year.
“I’m sure they will be looking to move quickly to begin the work on the expansion of the terminal,” she said. “I would expect it will be one series for the whole amount that they anticipate they need for the project.”
Whether the passenger facilities charges will be securitized has not been determined yet, she said.
If it were not for the alternative minimum tax holiday established under the American Recovery and Reinvestment Act, the bonds would be subject to the AMT. If the deal prices before the holiday’s expiration at the end of the year, or if Congress extends the holiday, the bonds would be tax-exempt.
The obligor is working with Citi on the deal and will choose its own bond counsel, according to Mulligan.
At the end of the lease, the facility reverts to the Port Authority’s control.
Delta would not confirm any details of the financing.
“Delta has been working closely with the Port to develop a plan for our JFK Terminal, one that reflects the significant investments we’ve been making in the New York market over the past several years,” the company said in a statement.
Delta handles almost a quarter of JFK’s 46 million annual passengers.
Under the plan, Terminal 3, which opened in 1960, will be demolished and an airplane parking facility would be built in its place. The Port Authority is not financing that portion of the project.
