San Francisco International to Revisit $323M Refunding

SAN FRANCISCO — San Francisco International Airport will sell $323 million of debt this week to refund outstanding revenue bonds in a revival of a deal it had shelved last year.

The San Francisco Airport ­Commission, which oversees the airport for the city of San Francisco, is tentatively scheduled to price the deal on Thursday.

Last October, the commission canceled the sale of slightly more refunding bonds because of poor market conditions.

“This is just, I am happy to say, a plain-vanilla refunding transaction,” said Kevin Kone, assistant deputy airport director. “Fortunately, the market has moved back far enough to bring these bonds back in the money.”

Kone said they are hoping for a good market reception Thursday in part because there has been a lack of airport bond issuances.

The bonds, secured by airport revenues, will be sold in three tranches — $126 million of bonds subject to the alternative minimum tax, $100 million of tax-exempt paper, and $96 million of taxable debt.

The revenue bonds will be used, along with other sources, to refund $330 million of outstanding revenue bonds issued in 1998, 1999, and refunding bonds issued in 2001, according to the preliminary official statement.

Kone said the commission hopes to save $700,000 to $900,000 per year in debt service savings by refunding the bonds.

Moody’s Investors Service rates the airport’s revenue bonds A1, Standard & Poor’s and Fitch Ratings rate them A, and all have assigned a stable outlook.

The agencies are expected to release updated reports on the ratings on Wednesday, according to Kone.

Moody’s said in a note in January that the airport has a strong position in the San Francisco Bay Area, a diversified carrier base, and strong liquidity that offset substantial financial risks.

The rating agency said the airport’s enplanements have continued to outperform national growth rates. Its enplanements grew 4.8% in fiscal 2010 compared to a year earlier.

The risks are tied to the airport’s $585 million swap portfolio, according to Moody’s.

Moody’s said the commission’s use of variable-rate debt has increased its exposure relative to its liquidity position, though recent transactions have moderated the risk.

Kone said the airport has no plans now to retire any of its swaps since they are performing well and have solid credit quality.

Barclays Capital is the lead underwriter on the deal. Orrick, Herrington & Sutcliffe LLP is bond counsel.

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Transportation industry California
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