BRADENTON, Fla. — Atlanta is preparing to price $372 million of senior general revenue refunding bonds next week as the first of two deals this year for the world’s busiest airline hub, Hartsfield-Jackson Atlanta International Airport.
The sale is expected to start with a retail order period on Tuesday and conclude with institutional pricing on Wednesday.
“We are expecting the sale to be very well-received,” said Atlanta chief financial officer Joya De Foor.
The interest on $226.06 million of Series A bonds will not be subject to the alternative minimum tax, while $146.04 million of Series B bonds will be subject to the AMT.
The transaction will current refund most of the airport’s outstanding 2000A, B, and C bonds for estimated net present-value savings of $34.8 million, or 8.7% of refunded par within existing maturities, according to De Foor.
Another $19.1 million in maturities may be redeemed using cash on hand at the airport.
The deal is structured to provide level annual debt service savings.
The Series A bonds are expected to be sold with serial maturities between 2013 and 2021. The Series B bonds have serial maturities from 2012 to 2027 and term bonds may be designated.
The city has received a commitment for insurance from Assured Guaranty Municipal Corp., though its use will be based upon market demand for insurance on select maturities and refunding economics, according to De Foor.
“There is a possibility that the sale may be modestly downsized or upsized based upon market conditions,” she said. “Certain maturities of the refunded bonds are particularly interest-rate sensitive and the city may include or exclude those maturities depending upon the level of savings associated with each maturity.”
The bonds are rated A1 by Moody’s Investors Service and A-plus by Fitch Ratings and Standard & Poor’s.
All three affirmed the same ratings on $1.9 billion of outstanding parity debt, as well as their stable outlooks on the airport’s bonds.
“In addition to the strong credit ratings on the bonds, there are structural features that make the sale particularly appealing to investors,” De Foor said.
“The proposed Series 2011A bonds mature within 10 years and the principal sizes range from approximately $22 million in 2015 up to $40 million in 2021,” she said. “The short maturities and large par sizes should appeal to retail and institutional investors who want to stay on the short end of the curve and also covet liquidity.”
The Series B bonds have slightly longer maturities with attractive par sizes ranging from $14 million to $19 million, De Foor added.
Atlanta, which owns and operates Hartsfield-Jackson, expects to issue up to $575 million of new-money bonds by the end of the year to pay for capital improvement projects, according to bond documents.
The size of the new-money deal could fluctuate depending upon which portions of the CIP are financed, according to De Foor.
It could include refinancing of up to $314 million of outstanding commercial paper.
A big-ticket item in the CIP is the new $1.51 billion Maynard H. Jackson Jr. International Terminal, which is 73% complete, on time and on budget.
No additional debt is expected to be sold for the 1.2-million-square-foot international terminal now scheduled to open in April 2012.
It will provide 12 gates that can accommodate wide-body aircraft, which supplements 28 wide-body gates at an existing international terminal.
The remaining $1.4 billion CIP will be funded through a combination of bonds, passenger facility charges, federal grants, commercial paper and other funds.
The airport served 89.3 million passengers last year. It’s the primary hub and corporate headquarters for Delta Air Lines, Atlanta’s top carrier. AirTran Airways is the second-largest carrier.
Analysts believe the airport is positioned to grow now that AirTran has merged with Southwest Airlines Co., which is headquartered at Dallas Love Field. Southwest plans over time to absorb AirTran’s operations under Southwest’s name.
Hartsfield-Jackson has sound financial operations and debt-service coverage ratios as well as a low-cost structure per enplaned passenger compared to other hub airports, according to Moody’s analyst Maria Matesanz.
Passenger enplanements continue to recover from the recession and are up 2.4% through April 2011 compared to the same period in 2009. The growth rate is 1.7% ahead of consultants’ estimations, Matesanz said.
Frasca & Associates LLC is the city’s financial adviser.
Siebert Brandford Shank & Co. is the book-runner on next week’s planned refunding.
Other underwriters are Goldman, Sachs & Co., Estrada Hinojosa & Co., Morgan Keegan & Co., Morgan Stanley, Raymond James & Associates Inc., Sterne, Agee & Leach Inc., and Terminus Securities LLC.
Hunton & Williams LLP and Haley & McKee LLC are co-bond counsel. Greenberg Traurig PA and Riddle & Schwartz LLC are co-disclosure counsel. Peck, Shaffer & Williams LLP is representing the underwriters.
