DALLAS — Dallas-Fort Worth International Airport will issue the first $301 million of revenue bonds this week toward a $2 billion renovation of the original terminals that opened 36 years ago.
Jefferies & Co. is book-runner on the negotiated deal. Loop Capital Markets, Barclays Capital, Morgan Stanley, Raymond James & Associates, and Stifel Niclaus are co-managers. First Southwest Co. is financial adviser. Vinson & Elkins of Dallas and Newby Davis of Fort Worth are co-bond counsel.
Moody’s Investors Service has rated the bonds A1 with a stable outlook. But analysts included the caveat that the airport’s plan to issue up to $2.3 billion “will likely cause debt metrics to deteriorate beyond the parameters of the current rating level.”
Ratings for DFW from Standard & Poor’s and Fitch Ratings were pending Monday afternoon.
The airport is beginning the next phase of major capital improvements after completing the Skylink automated tram connecting its five terminals. The new program is called Terminal Renewal and Improvement Program.
TRIP will renovate terminals A, B, C, and E from 2011 through 2017. The program will improve passenger flow and parking areas, as well as upgrade aging systems. The total program is expected to cost $1.92 billion, or $1.74 billion in constant 2010 dollars.
The airport last week announced a new, 10-year use agreement with its airlines, replacing the original 35-year agreement. The new agreement allows DFW to plan debt service and operating costs.
“This new use agreement gives DFW and its partner airlines a solid set of financial expectations for the next decade,” said chief executive Jeff Fegan. “It not only modernizes the business partnership between our airport and the airlines, it also clears the way for DFW to initiate the renovation program for our four original terminals.”
The agreement changes DFW’s business model from a “residual” to a “hybrid” model. The biggest difference is that the airport retains the net revenues from non-airline sources such as parking, concessions, commercial development, and car rentals.
The airlines pay the net operating costs of the airfield and terminals through landing fees and terminal rents. In the past, the airlines received the benefit of non-airline revenues and there was a year-end settlement to ensure that total revenues equaled total expenses.
“Although airline costs will rise over the next 10 years as DFW borrows money to fund the TRIP, DFW will remain one of the lowest-cost large hub airports in the country,” said chief financial officer Chris Poinsatte. “This was very important to the airlines during the negotiations.”
The agreement also includes two capital accounts. The joint capital account will require airline approval to be accessed, be funded largely by natural gas and land sale proceeds, and be supplemented with the issuance of debt.
The capital account will be used at DFW’s discretion for renewal and replacement of airport assets and will be funded from the net revenues from non-airline sources.
American Airlines, the airport’s dominant carrier, will continue to maintain terminals A and C, and new maintenance standards applied to all five terminals. DFW will assume the operating and maintenance costs for the Skylink people-mover system.
American Airlines has signed the agreement, and DFW officials expect the other airlines to sign by Dec. 31.
