DALLAS — The inland Port of San Antonio expects to issue $24 million of bonds after bypassing the debt market in 2012, according to Moody's Investors Service.

Moody's on Thursday affirmed the port's Baa2 rating and stable outlook on $38 million of outstanding debt used to convert the former Kelly Air Force Base to commercial use.

The outstanding revenue debt was acquired by the Texas Military Value Revolving Loan Fund and is not rated by Moody's. The future issue would support expansion of Boeing operations at the former base.

"The debt issuance planned for 2012 was not issued as the port continues to refine the scope of the project," according to the Moody's report.

The port has added a rail operator under an agreement beginning Tuesday. The port has also added a street adjacent to the runway, providing 150 acres ready for development.

Kelly Air Force Base was closed under the 1995 Base Realignment and Closure IV Commission and continued to provide some support to nearby Lackland Air Force Base as Kelly Field Annex. The remaining 1,873 acres, including hangars and industrial facilities is operated by the Port Authority of San Antonio.

The port provides transportation via an 11,500 foot runway and service by Union Pacific and BNSF railroads. So-called "NAFTA traffic," resulting from the North American Free Trade Agreement also arrives via truck on Interstate 35. Five major seaports in Texas and Mexico are accessible within a three-day drive.

Air Force lease revenues make up 4.1% of total lease revenues and the lease has been extended to 2016.

Port officials are seeking private development of a 45 acre mixed-use site to provide office space and parking. Future development will include retail, lodging and conference space on 400 acres.

The San Antonio Port Authority loaned $38.7 million to Boeing in 1998 to secure Boeing operations at the facility. The debt is fully amortized when the Boeing lease expires in 2018.

"The lease agreement ensures that the debt is fully paid by Boeing as early termination of the lease requires a full debt service payment," Moody's noted. "However the revenue debt is not secured by a similar provision."

Boeing and Lockheed Martin and their suppliers are the major tenants at the port.

"The Baa2 rating is based on the strength of the lease agreements with the top tenants Boeing (A2 stable outlook) and Lockheed Martin (Baa1 stable outlook), a strong management team that is focused on future development and healthy financial operations that produce sound debt service coverage," Moody's analysts said.

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