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MWAA Taps Two Syndicates

WASHINGTON — The Metropolitan Washington Airports Authority on Wednesday approved two underwriting syndicates for a total of up to $485 million of refunding bonds to be issued in two series next month.

Morgan Keegan & Co. will be senior manager, along with Bank of America Merrill Lynch and Siebert Brandford Shank & Co. as co-managers, for the sale of Series 2010E airport system revenue refunding bonds. Senior manager Barclays will team up with co-managers JPMorgan  and Loop Capital Markets for the sale of Series 2010F bonds. The bonds will refund munis that were issued in 1998 and between 2001 and 2004.

The MWAA plans to offer an “open-market purchase program” that will allow the underwriters to purchase up to $400 million of bonds as non-alternative minimu tax refunding bonds, according to chief financial officer Andrew Rountree. The bonds were subject to the AMT when issued between 2004 and 2008. But the American Recovery and Reinvestment Act exempts all tax-exempt bonds issued in 2009 and 2010 from the AMT, including bonds that refund munis issued since 2003.

The refundings and underwriting teams were approved yesterday by the MWAA’s finance committee and board of directors. The agency  estimates it will obtain a present-value savings of $2.8 million for the series E and F bonds.

Moody’s Investors Service rated the bonds Aa3 with a negative outlook based on “significantly higher” costs and lower debt-service coverage over the next five years, according to a report it released last week.

Moody’s said the MWAA expects its cost per passenger will increase to more than $21 beginning in fiscal 2011 from $13.47 in fiscal 2009. Simultaneously, debt-service coverage for airport system bonds is expected to decline below 1.35 times from 1.49 times in fiscal 2009.

This will be the second time this year that the authority has issued refunding bonds to take advantage of the ARRA AMT exception, Rountree said, adding that it sold about $100 million of series A and B refunding bonds earlier this summer.

Separately, the agency issued revenue figures for the Dulles Toll Road. Total revenues decreased by 3.2% in September from August.

But for the year-to-date period, toll revenues are 35.4% higher than the same period in 2009, thanks in part to a toll increase that took effect at the beginning of the year. Total road transactions this year have lagged 2009 totals in every month so far except in March.

The toll revenues are expected to provide most of the revenues needed to back debt issued for the second phase of the Metrorail extension project. The bonds are separate from the MWAA’s airport system debt.

The authority also reported the debt-service coverage increased in September for its bonds for the Metrorail extension project.

It has issued $1.30 billion of senior and subordinate debt for the project that will connect the downtown Washington metro system to Dulles International Airport.

Officials expect to issue another $1.5 billion of bonds to complete the project. The next round is expected to be sold the first half of next year.

The MWAA also reported on Wednesday that it has received $9.2 million of federal subsidy payments this year for Build America Bonds issued for the project.

The authority is facing higher costs for the phase two portion of the Metrorail extension.

It announced last month that it is considering building part of the second phase above ground to save about $640 million.

Rountree said no decisions have been made on that proposal and that agency “is still considering alternative alignments.”

The first phase of construction is underway and ­includes new metro stations in Tysons Corner, Va. Phase two is scheduled to be finished in December 2016.

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