Bond deal funds projects at fast-growing Pensacola airport

Pensacola International Airport

Buoyed by growing traffic and expecting more, Pensacola, Florida, plans to price $104.6 million of airport revenue bonds Tuesday. 

Passenger traffic at the Pensacola International Airport is already well above pre-pandemic levels, and enplaned passengers are forecast to increase from 1.6 million in fiscal 2025 to 1.8 million in fiscal 2031, according to an investor presentation for the deal.

The bonds are rated A-plus by S&P Global Ratings, Fitch Ratings and KBRA, all with stable outlooks. 

BoA Securities is the lead underwriter on the deal. 

PFM Financial Advisors LLC is municipal advisor. Bryant Miller Olive is counsel.

Bond proceeds will fund a capital plan that includes a new concourse with five new gates and an expanded security checkpoint.

Preliminary maturities are from 2026 to 2055. 

The bonds will be payable from a first lien on net revenues of Pensacola International Airport facilities, revenues and other funds. Of this, about 75% is expected to come from passenger facilities charges. The bonds have a 1.25X rate covenant and a multi-pronged additional bonds test. 

S&P anticipates the airport will have healthy financial metrics for debt service coverage, debt to net revenues, and unrestricted days cash on hand. 

Another positive is the airport's "executed airline use-and-lease agreements that are expected to provide 20% of non-airline revenues at the end of each fiscal year to pay a portion of airport capital needs, limiting the airport's need to borrow and preserving healthy coverage and liquidity."

For credit negatives, S&P pointed to the airport's relatively small size and the fact tourism accounts for about 45% of the visitors. S&P mentioned the possibility the airport will borrow more for its capital improvement plan. 

The airport has an above average exposure to hurricanes but this is mitigated by its efforts to harden against category 5 hurricanes. 

Pensacola says that its enplanements grew at a compound annual growth rate of 5.5% from fiscal 2010 to 2024. Airport costs per enplanement in fiscal 2024 was $4.46, which is an improvement from the $5.44 found in fiscal 2019. The airport had 1283 days cash on hand as of fiscal 2024. 

Signatory airlines are American Airlines, Delta, Southwest, Spirit and United. 

The bonds are being sold at a time when most airports are doing well but some small ones may be pressured by the federal shutdown.

The bonds are subject to the alternative minimum tax.