Atlanta OKs $1.4B, Mostly for Airport

BRADENTON, Fla. - The Atlanta City Council on Monday approved the sale of $1.4 billion of new-money and refunding bonds, with most of the proceeds going toward completion of the new international terminal at Hartsfield-Jackson International Airport.

While the bonds have yet to be validated by a court and the structure of the deal is not complete, city finance officials are expected to make use of the two-year holiday from the alternative minimum tax afforded by the federal stimulus act when they sell $800 million of new airport revenue bonds and $590 million of refunding debt.

Of immediate concern is the refunding, which has been delayed since last year by market conditions and negotiations with Delta Air Lines, the airport's largest airline.

"The purpose of this [refunding] transaction is to refinance some variable-rate bonds," Carmen Pigler, Atlanta's chief of debt and investments, told the City Council on Monday.

Pigler went on to note that the variable-rate market isn't as "robust" as when the underlying bonds were issued in 2003 and remarketing has been difficult because the bonds are insured by MBIA Insurance Corp., which has since been downgraded from triple-A.

"For that reason it is causing increased debt service for this transaction and we've decided that it is in the best interest of the airport to refinance these bonds from variable rate to fixed rate," Pigler said.

She also told the council that MBIA is believed to be close to being downgraded below investment grade, which would trigger events related to the variable-rate airport bonds.

The refunding also will be used to terminate swaps with Goldman Sachs Mitsui Marine Derivative Products LP and JPMorgan. Banc of America Securities-Merrill Lynch will be the senior manager on the refunding, while Greenburg Traurig LLP will be bond counsel.

The bonds are expected to be sold in late August.

Atlanta owns and operates the airport and issues debt for it. The international terminal project is part of Hartsfield-Jackson's $6 billion capital improvement plan and is scheduled to be completed by 2012.

In addition to the airport bonds, the City Council also unanimously approved a resolution authorizing the preparation of a comprehensive financial stabilization plan to deal with plummeting revenues and institute short- and long-term financial planning and monitoring.

The plan also will include ways to reduce the amortization period of the unfunded accrued liability for three pension plans, establish a $100 million rainy-day fund, and planning for future bond issues to fund Atlanta's long-term infrastructure needs.

In approving the measure, the council recognized recent downgrades by rating agencies because of Atlanta's diminished financial position and trend of operating deficits. In March, the city's general obligation rating was downgraded to A1 from Aa3 by Moody's Investors Service and to A from AA-minus by Standard & Poor's.

The city ordinance also said that many of the recommendations in the stabilization plan, as well as a separate action reorganizing the city's finance department, were aimed at improving Atlanta's credit rating.

The initial five-year financial stabilization plan will be submitted to the council by Oct. 15. The plan will be updated annually.

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