BRADENTON, Fla. — Hoping to tap the same investor momentum seen in a recent oversubscribed offering, Atlanta has accelerated plans to market a $505 million refunding for Hartsfield-Jackson International Airport that was expected to sell next year.
The Series 2010C fixed-rate general airport revenue refunding bonds will be sold Monday and Tuesday in a negotiated deal co-managed by Citi and Loop Capital Markets.
Proceeds will refund the airport's 2003RF-B/C variable-rate demand bonds and reimburse the airport's renewal and extension fund for $18.5 million in swap termination fees paid to Goldman Sachs Mitsui Marine Derivative Products LP and JPMorgan last year.
In addition, proceeds will cash-fund the debt service reserve.
The transaction is expected to have serial bonds maturing between 2012 and 2025 and a $182.13 million term bond maturing in 2030, according to the preliminary official statement. The bonds are structured with level amortization.
A commitment to insure the bonds has been obtained from Assured Guaranty Municipal Corp., which most likely will be applied to some maturities, said Stefan Jaskulak, Atlanta's deputy chief financial officer.
The 2003 refunding VRDBs were sold as governmental bonds exempt from the federal alternative minimum tax, he said, so the Series 2010C bonds are exempt from the AMT.
The deal is expected to be attractive to retail and institutional investors, according to Jaskulak.
"This is the refunding that was originally scheduled for early 2011, but we decided to advance it to December to take advantage of the favorable market conditions and the strong demand we saw for the new-money bonds in November," he said. "The city conducted significant investor outreach and marketing efforts … and we believe these efforts will benefit next week's sale."
In the first fixed-rate deal in six years for the Hartsfield airport, Atlanta sold $588 million of Series 2010A bonds on Nov. 5 to provide the last financing for the new $1.5 billion Maynard H. Jackson Jr. International Terminal, which will open in 2012.
Underwriters said the entire transaction was oversubscribed with wide investor interest complemented by the lack of Georgia paper in the market.
The sale also was aided by the fact that many other deals marketed the same week sold as taxable Build America Bonds for which most of the federal authorization expires Dec. 31.
The all-in true interest cost on the November deal was 4.19% — a rate underwriters said was one of the lowest they had seen in recent memory.
Next week's refunding may come to market amid a light calendar of negotiated pre-holiday deals, though it is expected to see strong results because of the airport's credit strength and the limited amount of bonds sold in the last few years, Jaskulak said.
The refunding bonds are rated A-plus by Fitch Ratings and A1 by Moody's Investors Service. Both agencies have stable outlooks on the credit.
Analysts said the Atlanta airport is well-served by strong financial operations and metrics, including good debt-service coverage levels and liquidity.
The airport enjoys a low cost structure, strategic geographic location in the Southeast, and limited competition from nearby airfields.
Hartsfield-Jackson, with 88 million passengers a year, is the primary hub and corporate headquarters for the second-largest U.S. carrier, Delta Air Lines, and a hub for low-cost carrier AirTran Airways, which is merging with Southwest Airlines Co.
Analysts expressed some concern about the airport's concentration of services from Delta and its regional carrier, but said it has emerged from bankruptcy to successfully merge with Northwest Airlines.
"The completion of the new international terminal and the entrance of service by Southwest under its own brand may serve as catalysts for future growth," said Fitch analyst Seth Lehman.
Lehman said the airport's financial profile has served as a key element of strength to the credit.
Cash reserves and airline cost-per-enplanement levels have been "well managed" over the past five years with the airport generating significant revenue from non-airline sources, including concessions and passenger facility charges, he said.
"Airlines contribute a relatively low 38% of total operating revenues while PFC collections at current traffic levels exceed $175 million per year," Lehman said. "While airline payments increased by 7% since fiscal 2008, primarily due to rising debt service and operating requirements, the current airline cost is still low for a large hub airport at $3.40 per enplanement."
Debt-service coverage levels for the senior-lien general airport revenue bonds over the past three years have ranged from 1.66 to 2.10 times. The airport has moderate debt levels of $48 per enplanement and substantial, unrestricted cash reserves of $454 million, according to Lehman.
Following next year's refunding, Hartsfield-Jackson will have little or no variable-rate exposure, and no outstanding derivatives.
The refunding will take out VRDBs for which bondholders' optional tender rights have been suspended since October 2009 due to the lack of liquidity facilities. The liquidity facilities were terminated after Standard & Poor's downgraded the insurer, MBIA Insurance Corp., to BB-plus from BBB.
Other underwriting firms on next week's deal are Barclays Capital, Blaylock Robert Van LLC, Cabrera Capital Markets LLC, Rice Financial Products Co., and SunTrust Robinson Humphrey.
Frasca & Associates LLC is financial adviser to the Atlanta aviation department. First Southwest Co. and DOBBS, RAM & Co. are co-financial advisers to the city.
Greenberg Traurig LLP is bond counsel. Greenberg and Riddle & Schwartz LLC are co-disclosure counsel. Schiff Hardin LLP is underwriters' counsel.
