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Los Angeles World Airport Board Approves $1 Billion in Bonds

LOS ANGELES — The Los Angeles Board of Airport Commissioners on Monday gave airport officials the authority to issue up to $1 billion of revenue bonds, which may include direct bank loans or private placements.

Capital development and budget director Ryan Yakubik said airport officials asked for permission to explore private placement, because he has been hearing that banks are providing attractive short- to intermediate-term loan rates.

“We are just leaving the door open to explore that option,” Yakubik said. “It’s not a foregone conclusion that this is what we will do.”

He said he’s been seeing evidence that with regulatory changes banks have been more open to accepting a lower rate of return to get high-quality debt on their books.

Yakubik doesn’t anticipate there would be the capacity to do a private placement on the entire $1 billion, however.

“One way or another, we will be taking a traditional bond deal to market,” he said. “We have a couple of refinancings that could run short and are of the size that would be attractive to a big bank, something under $40 million with maturities of 10-12 years.”

The Los Angeles World Airports bonds would be used to finance airfield and terminal capital projects at Los Angeles International Airport and refinance outstanding commercial paper, according to Yakubik.

The board approval gives airport officials the authority to issue the bonds, but they would still have to return to the board for approval of financial documents before bonds are issued. The Los Angeles City Council also has to vote on the bonds.

“We are getting the authority so that as additional improvements come forward over the next 18 months, we have the ability to go to market to fund them,” Yakubik said.

The bonds would be issued in three transactions, around $300 million each, starting with a $250 million to $300 million issuance in November that would be part refunding and part new money. Officials would look to issue the second set in the middle of next year, and the third set in late 2013 or early 2014, Yakubik said.

“We haven’t figured out pricing yet,” he said of the series planned for November. “Obviously the rates are low, so we think we are going to get attractive rates.”

The bond proceeds would pay for tenant improvements on terminals 5 and 6 where Delta, Alaska and United airlines are located, Yakubik said. Other projects to be funded by the bonds are general airfield improvements, taxiways, and runway rehabilitation efforts.

LAX is midway through a $4.11 billion improvement project that will add over 1.25 million square feet of shops, restaurants and passenger lounges, as well as additional security screening and baggage claim facilities. The bond issuance will crank the airport’s debt up from $3.51 billion to $4.5 billion, resulting in higher debt-service payments, but officials said based on current forecasts LAX’s revenues will be able to support the debt service.

The board approved the following firms as underwriters for all or a portion of the bonds: Siebert Branford Shank & Co., JPMorgan, Citi, Morgan Stanley, De La Rosa & Co., Samuel A. Ramirez & Co., Cabrera Capital Markets, Loop Capital Markets, Stone & Youngberg,  a division of Stifel, Nicolaus & Co., Bank of America Merrill Lynch, Wells Fargo Securities and M.R. Beal & Co.

Citi, De La Rosa and Morgan Stanley would each be senior manager for one of the three planned deals.

Bonds issued by Los Angeles World Airports, or LAWA, are rated AA by Standard & Poor’s and Fitch Ratings and Aa3 by Moody’s Investors Service.

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