Airports Move Onto the Runway at JPM Financing Conference

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Airport issuance spiked over the past two years and more deals are on the way, as officials look to maintain and improve their facilities and lower borrowing costs.

JPMorgan's 7th annual public finance transportation and utility conference in New York featured presentations from Dallas/Fort Worth International Airport and the Metropolitan Washington Airports Authority, which are taking differing approaches to financing their needs.

Since 2007, airports have issued $108.73 billion of municipal bonds, according to Thomson Reuters. Issuance peaked in 2010 with $18.54 billion of airport deals in 153 transactions. Airport issuance surged to $10.62 billion in 2015 and $12.45 billion last year, led by the historic $2.4 billion public-private partnership transaction to fund a $4 billion development of New York's LaGuardia Airport.

Michael Phemister, vice president, treasury management for Dallas Fort Worth International Airport, said DFW isn't trying to duplicate the LaGuardia deal.

"All airports are uniquely different," he said. For example, LaGuardia is going to be completely overhauled, he said, while DFW airport has plans that focus mainly on the airfields.

"DFW Airport has been open since 1974. Because we have been operational for 43 years, we do need to make some airfield improvements and two runways will need to be reconstructed over the next 10 years," Phemister said. "And we are looking at the addition of three perimeter taxiways in addition to the one we already have. They will cost about $150 million each. It is first and foremost a safety issue, but it will also help with efficiency and capacity."

Phemister said DFW is negotiating with American Airlines about terminals and how to improve their baggage system.

"Right now we can move people around the airport via Skylink quickly and efficiently, but it's hard to move baggage," he said.

DFW Airport is planning to be one of the first airports to shift away from issuing non-alternative minimum tax bonds , issuing taxable bonds instead, which officials see as the wave of the future, especially given the reduction in tax rates contemplated in Washington.

"The taxable market gives us a boarder market and it is attractive to foreign investors as well, giving us a larger market and more buyers," Phemister said. "We will be issuing taxable bonds only for terminal improvements. We will continue to issue tax-exempt bonds for airfield, roadways, etc."

MWAA is responsible for managing operations and relations for two airports, Dulles and Reagan National Airports. The authority is setting its sights on coming to market in early June with $425 million of refunding, possibly with a new money component, in support of its airport capital construction program, which primarily includes a new north concourse for Reagan National Airport and a major security checkpoint relocation project at that airport.

Andrew Rountree, CPA, vice president for finance and chief financial officer for MWAA, testified to the importance of JPMorgan's annual conference.

"There is always a lot of interest in our bonds and if you're an owner of our bonds or a potential investor, it's important to stay updated with our credit and also informed about MWAA's plans for future capital projects," he said. "JPMorgan does a terrific job of getting everyone that you would want to talk to about investing in our bonds in one place and that is why we feel this event is well worth our attendance. We want investors to remain confident in our credit which gives us the ability to not only access the market at favorable rates to complete projects when needed, but also access to capital to maintain infrastructure projects throughout their lifespan."

Paul Palmeri, managing director and head of public finance for JPM said that this conference has become the marquee event in the industry, as it has continued to grow and provide significant value to JPM's issuer and investor clients.

"This year we had almost 500 market participants and it was a great opportunity for everyone to get together, especially with renewed political interest in infrastructure," Palmeri said. "Bringing all of the players together in the same location, we were able to facilitate over 300 valuable, one-on-one meetings with issuers and investors."

Jamison Feheley, JPM's head of public finance banking noted that there was once again a record turnout this past year at full capacity for the event.

"We had a core group of clients who have been with us since we started the forum in 2010, in addition to several new issuers that we were excited to have join us this year. We are very grateful and proud that we continue to hear from investors and issuers that this is the one event they prioritize every year."

 

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