BRADENTON, Fla. — Atlanta may bring its next airport bond issue to market sooner than anticipated because of widespread investor interest in last week's successful sale of $588 million for Hartsfield-Jackson Atlanta International Airport, officials said.
The retail order period generated more than $300 million in orders on Wednesday, and the remaining portion offered to institutional investors Thursday "went extremely quickly," said Peter Clarke, vice chairman of public finance at JPMorgan, co-senior manager on the deal with Jackson Securities.
Despite the backup in the Treasury market following the announcement about quantitative easing last week, he said there was still strong demand for tax-exempt paper.
"There hasn't been a lot of long-dated tax-exempt paper in the market since [taxable Build America Bonds] were introduced," Clarke said. "This wasn't a deal dominated by three or four portfolio managers. There were more than 40 institutional investors in the order book. We improved pricing through the initial marketing period, and it was oversubscribed top to bottom. The execution went very smoothly."
The first fixed-rate deal for the world's busiest airport in six years sold in two series to provide the last bond financing deal for the new $1.5 billion Maynard H. Jackson Jr. International Terminal, which will open in 2012.
The $177.9 million of Series A general airport revenue bonds sold with yields ranging from 1.63% in 2014, to 3.97% in 2023, to 4.84% in 2040. About $50 million was wrapped by Assured Guaranty Municipal Corp.
Some $409.8 million of Series B bonds with a hybrid security consisting of passenger facility charge and subordinate general airport revenues sold with yields ranging from 1.35% in 2013, to 2.81% in 2017, to 4.38% in 2026.
Moody's Investors Service assigned an A1 rating to both series, which represented an upgrade from A2 for the hybrid bonds. Fitch Ratings assigned an A-plus to the senior bonds and an A to the hybrid bonds.
The all-in true interest cost on the transaction was 4.19% — a rate underwriters said was one of the lowest they'd seen in recent memory.
"As the largest deal of the week, the city's airport bonds received a great deal of the market's focus," said Bruce Gow, president at Jackson Securities. "So many of current large deals are all or mostly BABs and since Atlanta airport was all tax-exempt, buyers were able to get allocated larger blocks, which helped the pricing."
Underwriters attributed a great deal of the sale's success to the lack of Georgia paper in the market and a concerted pre-sale marketing effort, aimed at introducing investors to new city officials, including Atlanta Mayor Kasim Reed, the city's new chief financial officer Joya De Foor, and Hartsfield-Jackson's new general manager Louis Miller.
In addition, officials from Delta — the airport's largest airline — also participated in investor presentations.
"We were very pleased with the reception in the marketplace," De Foor said. "With the appetite for this financing, we most likely will accelerate our refinancing for December rather than January."
That deal could bring another $541.9 million of fixed-rate airport bonds to market before year's end.
The transaction would include refunding $464 million of variable-rate demand bonds sold in 2003. The city has planned for some time to refund the bonds due to remarketing difficulties that arose when the insurer, MBIA Insurance Corp., lost its triple-A ratings. Subsequently, the downgrade triggered a loss of liquidity facilities.
Proceeds would also provide $18.5 million for reimbursement of swap termination fees already paid to Goldman Sachs Mitsui Marine Derivative Products LP and JPMorgan. Another $5.4 million would pay costs of issuance, and $54 million would go to a debt-service reserve fund.