CHICAGO — The Chicago City Council will take up ordinances as soon as Wednesday authorizing up to $1.65 billion of O'Hare International Airport debt to refund existing bonds for savings and raise new money for the airport's $8 billion expansion and other capital projects.

The council's Finance Committee Monday advanced ordinances authorizing the O'Hare borrowing and another $350 million in a tax-increment financing deal and motor fuel tax revenue bond transaction.

The largest transaction would be up to $900 million of senior lien general airport revenue bonds. It offers a mix of new-money and refunding bonds that should raise about $300 million for projects under the $8 billion O'Hare Modernization Program. Proceeds will also finance the airport's capital improvement program.

The sale is expected later this year. JPMorgan is the senior manager. Ramirez & Co. and Siebert Brandford Shank & Co. LLC are co-senior managers. Frasca & Associates L.L.C and DNG Consulting LLC are advisers. Ricondo & Associates is airport consultant. About 40 % of the finance team including lawyers and advisers are minority, women, and disabled veteran-owned firms, said Chicago chief financial officer Lois Scott.

In a separate transaction, the city will sell up to $750 million of customer facility charge revenue bonds, the city's first use of such a credit. Proceeds will finance construction of a new rental car facility with the debt repaid with special charges paid by users. The sale is expected in the second quarter.

Bank of America Merrill Lynch is the senior manager with Estrada Hinojosa & Co. Inc. and Raymond James serving as co-senior managers. Frasca, DNG, and Ricondo are also working on the rental car facility bonds. About 35% of the team is made up of minority, women, and disabled veteran firms.

The city last August sold $1.2 billion of O'Hare debt in a refunding that generated double-digit savings and streamlined the facility's GARB-lien structure under one new senior lien. The sale came after a Moody's Investors Service downgrade and amid uncertainty over the future operations of one of the airport's hub carriers, American Airlines, which is in bankruptcy. American is wrapping up its Chapter 11 reorganization — filed Nov. 29, 2011 — and a merger with US Airways was announced last month.

United Airlines — which also operates a hub at O'Hare — and America have resisted Mayor Rahm Emanuel's efforts to push forward on remaining projects under the OMP, which reconfigures and expands the airport's runways. They want projects tied to increased demand. A deal reached in 2011 in which the airlines agreed to a wave of projects totaling $1.17 billion called for the parties to return to the bargaining table this month to agree on the next phase.

Illinois two U.S. Senators, Democrat Dick Durbin and Republican Mark Kirk, recently sent American-US Airways executives a letter stressing the importance of reviving talks on the remaining projects, stressing their importance in easing delays that impact the national air traffic grid. US Airways chief executive officer Doug Parker, who will lead the combined airlines, agreed last week in a meeting with Durbin to set up one with Emanuel.

The city is planning also to sell up to $275 million of motor fuel bonds in a mix of new-money and refunding debt. Loop Capital Markets LLC is the senior manager and Cabrera Capital Markets LLC and BMO Capital Markets are co-senior managers. About 70% of the overall financing team is represented by minority, women, and disabled veteran-owned firms, Scott said.

The city intends to sell the bonds in the second or third quarter. The size depends on the outcome of the city's application for $96.5 million in loan assistance for its Wacker Drive reconstruction project through the federal government's Transportation Infrastructure Finance Innovation Act program.

The program provides loans and loan guarantees for rail lines, marine ports, pipelines, airports, highways, bridges, public transportation systems and other transportation-related projects. The city hopes to tap the program to reduce borrowing costs. The city would use the annual savings from the refunding piece "to fund projects on a pay-as-you-go basis," Scott said.

Fitch Ratings last month put its A-minus rating assigned to the motor fuel tax bonds on negative watch due to its exposure to the state's credit which is on negative watch. The action impacts about $180 million of debt from issues in 2003 and 2008. The bonds are secured by a first lien on all motor fuel taxes distributed to the city by the state, subject to annual appropriation by the state legislature.

"Revenues are distributed according to a formula controlled by the state and are subject to annual appropriation by the state. Therefore, the rating on these bonds is capped at one notch below the state's GO rating," Fitch wrote. The credit benefits from strong coverage of pledged revenues of about 3.4 times.

The TIF bonds will refund up to $75 million of outstanding debt tied to the city's Pilsen Redevelopment Project. The city expects to seek a first-time rating for the bonds and swap a current interest rate of 6.75% for one in the 2.5 % range.

Cabrera is the senior manager with Estrada Hinojosa and Duncan-Williams Inc. serving as co-senior managers. All members of the team including advisers and legal firms are minority, women, or disabled veteran-owned firms, Scott said.

The deals marked the first in which underwriters were required to submit additional disclosure information. Underwriters already routinely submit an economic disclosure statement. Finance Committee Chairman Edward Burke in a letter dated Feb. 27 requested additional information on broker-dealers' local, state and federal taxes paid, number of local employees, and charitable contributions, according to sources.

At O'Hare, the impact of the US Airways-American merger could be muted because US Airways has just a small presence there with little overlap between the two carriers' routes. However, there would remain some uncertainty as the two fold their routes together.

"In Fitch's opinion, the central risk for the incumbent American hubs would be a major loss in connecting traffic, exacerbating the debt burden and airline cost profile," Fitch Ratings wrote in a special report on the potential merger published Wednesday. Based on past airline mergers, some hub airports have been strengthened while others weakened. Combined, the two would operate six hubs.

Moody's rates the airport's $6.5 billion of GARBs at A2. Fitch assigns its A-minus rating and a negative outlook. Standard & Poor's also rates the bonds A-minus, but with a stable outlook.

The airport's debt portfolio includes another $800 million of bonds backed by passenger facility charges levied on passenger travel. They are rated A2 by Moody's, A-minus by Standard & Poor's and A by Fitch.

Moody's downgrade of the GARBs stemmed from O'Hare's high leverage, narrow financial margins, and economic and construction risks tied to the magnitude and complexity of OMP projects. Its challenges are heightened by weak economic growth and American's bankruptcy.

The city counters that the positive benefits of the OMP, including reduced delays and increased capacity, are well worth the strain. The credit benefits from the region's large economy and the airport's strong origination and destination market, its unique dual hub status with American and United accounting for 80% of flights, and the on-time and on cost completion of the $3.28 billion first phase of OMP.

Fitch warned in its last report that sustained high leverage, rising costs and a contraction in traffic figures could drive a downgrade. Annual debt-service requirements are projected to rise from $276 million in 2011 to over $600 million by 2017, Fitch said. Debt service coverage on GARBs remains at the required 1.1 times. Standard & Poor's attributed its outlook change in part to uncertainty over financing for $2.3 billion worth of future O'Hare projects.

Former Mayor Richard Daley unveiled the expansion plan in 2001 and had wanted it completed by 2014, but that date has been pushed off and plans for a new $2 billion terminal are on hold.

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