The Wayne County Airport Authority, which runs the Detroit Metropolitan Airport, said it achieved $51.7 million in net present-value savings in a recent refunding.
The authority refunded a total of $838 million of bonds in a series of December transactions that featured interest rate savings, shifting bonds into debt not subject to the alternative minimum tax, and penalty-free swap terminations.
“We took advantage of both interest rates and the economic stimulus program to reduce the cost of debt service as an overall part of our operating costs,” chief financial officer Thomas Naughton said in a statement. “Once we went to market, the outcome was actually more beneficial than we had initially envisioned.”
The authority refunded $231.3 million of fixed-rate bonds for interest savings, achieving rates between 2% and 5% on debt that had carried rates as high as 5.375%. Shifting another $216.5 million of fixed-rate AMT bonds into non-AMT debt saved another 75 basis points on average across all maturities, officials said.
The federal program allowed issuers to refinance bonds issued from 2004 to 2008 into non-AMT debt. It expired Dec. 31.
The authority also terminated interest-rate swaps associated with $162 million of variable-rate debt. No termination fees were necessary because the original swaps featured a seven-year call.
“While it was a complex effort involving various steps and elements, in the end this initiative proved to be very cost-effective for the Airport Authority,” said interim chief executive officer Genelle Allen.
The agency has $2.1 billion of outstanding senior- and junior-lien bonds. In August, Fitch Ratings dropped all of the Detroit airport’s debt to A-minus from A.
Before the December sale, Moody’s Investors Service revised its outlook to negative while affirming its A2 rating on the senior debt and A3 on the subordinate debt.
Standard & Poor’s rates the airport’s senior-lien debt A and junior-lien A-minus. It maintains a stable outlook.