BRADENTON, Fla. — Broward County, Fla. plans to sell $434.2 million of general airport revenue bonds to further work on Fort Lauderdale-Hollywood International Airport's $2.3 billion capital improvement program.
In concert with the sale, a local retail investor outreach program is being launched to support the south Florida county's largest public works project, and future county bond issuances.
A retail order period will be held Monday, and institutional sales will be Tuesday.
It's the second of five financings for the airport's capital improvement plan, and will fund completion of the new $791 million south runway as well as design and initial construction work on new gates and terminal renovations.
Most of the work is to address airfield and terminal capacity issues, and to reduce operational delays.
The 30-year, fixed-rate revenue bond deal is expected to be structured in three series as $165.5 million subject to the alternative minimum tax, a $55.4 million non-AMT series, and another $214.3 million of non-AMT bonds. Final maturity will be in 2043.
Each series is expected to have serial and term bonds available to all investors, according to Broward Chief Financial Officer Scott Miller. The offering is structured to produce level debt service on each series.
The bonds are rated A by Fitch Ratings, A1 by Moody's Investors Service, and A-plus by Standard & Poor's. All three agencies confirmed their ratings on about $1.14 billion of outstanding airport revenue bonds.
Fitch and S&P maintained stable outlooks on the airport bonds, while Moody's maintained a negative outlook due to the size and complexity of the capital plan, projected below-median coverage ratios, and more limited financial flexibility.
The transaction should see good demand, but Moody's negative outlook may be priced into the sale, said a trader familiar with the credit.
"As long as this market holds in there, and no major market-shaking events occur, this deal will get a good reception," the trader said. "Everyone is looking for yield."
The county's plan to increase local retail participation in the offering should also help the sale, said the trader.
"I think there is always good retail demand for Florida paper."
Broward County, which owns and operates the airport, intends to give priority to county residents during the retail-order period, and increase publicity for the bond sale on its website.
The website also will include a "how-to" guide for buying county bonds.
"The county typically allows for a retail order period, however, we want to increase publicity to Broward residents for this and future bond sales," Miller said, adding that retail investors will be able to place orders any time during the sale.
Miller also said that the county has not received any specific requests from local investors for airport bonds, "but this is a very important project for the community and the county wants to make every effort to give residents the opportunity to invest."
Retail has not been a major investor in airport bonds historically, though officials hope to increase the sector's participation on next week's offering and future issues, he said.
"We are anticipating a strong market for our bonds from all investors," said Miller. "The county hosted an onsite investor conference and facility tour, which was well received by investors from across the country."
Miller said a number of strengths underpin the capital improvement program at Fort Lauderdale-Hollywood International Airport, also known by its airport code, FLL.
The Broward County Aviation Department received signatory airline approval of the $2.3 billion CIP and the financing requirements.
In February 2011, the Federal Aviation Administration issued a letter of intent to assist with up to $250 million in funding for the south runway expansion project, which will be paid over 12 years.
Fort Lauderdale-Hollywood has 55% of southeast Florida domestic origination and destination traffic. To the south, Miami International's O&D market share is 28%. To the north, Palm Beach International's share is 17%, Miller said.
Earlier this year, JetBlue Airways announced its "FLL100 Plan" to increase the carrier's average daily departures to 100 by the end of 2017, which is double the number of current flights. Many of the potential routes will serve Central and South America.
"This plan also may include the construction of a maintenance facility and the addition of a significant number of employees," Miller said.
In May, JetBlue President Dave Barger told the Sun-Sentinel that the airline supports Broward's $2.3 billion CIP. He called the runway expansion "a big deal" that presents opportunities for growth.
FLL, which has maintained a low-cost structure to attract low-cost carriers, will be JetBlue's third-largest city behind New York and Boston.
Planning for the runway extension began nearly two decades ago.
The runway will be lengthened to 8,600 feet from its current 5,275. The plan will require the new runway to be elevated by 64 feet to cross a railway and the busy U.S. 1 highway.
In addition to relieving flight delays the longer runway can be used by larger aircraft. It is expected to open in September 2014.
The airport had 11.75 million enplanements in fiscal 2012. In the first nine months of 2013, enplanements were up 1.5%.
FLL's cost per enplaned passenger is estimated at $4.12 in 2013, and is projected to peak at $7.74 in 2018, which is still competitive relative to peers, according to Moody's. Low average fares make the airport attractive relative to multiple competitor airports in the area, the rating agency said.
The top three carriers in 2012 were Southwest Airlines Co., Spirit Airlines Inc., and JetBlue, S&P said.
A recent change to the capital plan increased its cost to $2.3 billion from $2 billion last year. The additional $300 million will renovate four terminals with improvements such as enhanced passenger processing, improved ticket lobbies and other facilities, as well as significantly expanded concessions.
In addition to federal grants, about 70% of the CIP will be funded with bonds, and the remainder will come from passenger facility charges and state and federal grants.
Broward began the financing program in September 2012 with the sale of $621.13 million of airport revenue bonds. In addition to next week's deal, the county expects to sell about $310 million of bonds in 2014, $358 million in 2015, and $87 million in 2016.
Public Financial Management Inc. and Fidelity Financial Services LC are the county's financial advisors.
JPMorgan is the book-running senior manager and Raymond James & Associates Inc. is co-senior manager. Morgan Stanley & Co. LLC, Ramirez & Co. Inc., and Siebert Brandford Shank & Co. are co-managers.
Squire Sanders LLP and Perry E. Thurston PA are co-bond counsel. Nabors, Giblin & Nickerson PA and Saunders Legal Strategies & Solutions PL are co-disclosure counsel. Greenberg Traurig PA is counsel to the underwriters.