DFW sets $2 billion bond sale for bigger capital program

Bloomberg News

Airports in the Dallas area are expanding to accommodate growing passenger volume with the market leader, Dallas Fort Worth International Airport, scheduled this week to sell $2 billion of revenue bonds to fund capital projects and refund outstanding commercial paper notes.

Dallas Love Field, which completed a master plan last month, is working on a program to enhance its capacity, while McKinney National Airport is preparing to introduce commercial airline service.  

DFW's bond sale — one of its largest — comes amid a massive capital improvement program to add 40 gates with 31 to be at a new sixth terminal, as well as renovations to existing terminals. The increased capacity would accommodate a projected 105.3 million passengers in fiscal 2030.

As the second busiest U.S. airport in 2024, DFW's passenger volume totaled 87.8 million, a 7.4% increase over 2023, according to Airports Council International – North America. 

In May, DFW and American Airlines, the airport's dominant carrier, announced an agreement to accelerate and expand plans for a new Terminal F, with the number of gates increased to 31 from 15. The agreement extended American's use and lease agreement to 2043 and boosted the terminal's estimated price tag to $4 billion from $1.6 billion. It also increased the cost of the DFW Forward capital program to about $12 billion from $9 billion.

Moody's Ratings revised the outlook on the airport's A1 rating to stable from positive, citing risks posed by the addition of a bigger Terminal F project to the near-term capital program.  
"The full Terminal F program, along with other smaller projects, will require around $4 billion of debt above what was previously expected," Moody's said in an August rating report.

"Additionally, the new phases of the Terminal F projects still require design and procurement and leaves some uncertainty around the final cost of the project."  

The airport received the positive outlook just last year from Moody's, which said the move reflected an increased likelihood the capital program would be completed "without an undue increase" in leverage.

"I knew with an expanded capital program that Moody's would likely take us back to stable," Christopher Poinsatte, the airport's chief financial officer, said on Monday. "So we're hoping by a year from now that they'll come back around and see that we've been able to manage everything to the numbers that we said."

S&P Global Ratings, which upgraded DFW last year to AA-minus with a stable outlook from A-plus with a positive outlook, said the acceleration and higher debt shouldn't pose a problem when it affirmed its rating Aug. 26.

"Although the airport is accelerating the capital plan and increasing their debt and liability burden, in our opinion, the extended agreement is expected to support the projects and to accommodate what we view as an achievable passenger growth forecast of 100 million in 2029," S&P's rating report said.

KBRA affirmed its AA rating and stable outlook ahead of the deal and listed budget exposure for the Terminal F project as a credit challenge for the airport, while noting the project and American's extended agreement with DFW "reduce the likelihood of a strategic pull-down or reallocation of capacity to other hubs" by the airline. 

The bond pricing scheduled for Wednesday may be helped a bit by Friday's weak jobs report, according to Poinsatte.

"We sure would like to see rates a lot lower than they are," he said. "This is going to be one of the higher true interest cost deals that we've done in a long, long time."

The refunding component of the two-part deal involves about $650 million of commercial paper the airport uses for interim financing, including $200 million of extendable commercial paper, he added.

DFW's use of extendable commercial paper – a first by a U.S. airport – led to its selection as the Southwest Region winner in The Bond Buyer's 2024 Deal of the Year awards.

One part of the DFW deal consists of two series of joint revenue refunding and improvement bonds subject to the alternative minimum tax with $300 million of put bonds that have mandatory tenders in 2029 and 2032, according to the preliminary official statement. It also includes nearly $1.417 billion of fixed-rate bonds structured with serial maturities from 2026 through 2046 and term bonds due in 2050.

BofA Securities is the senior manager with JP Morgan as co-senior manager. Co-managers are Baird, Cabrera Capital Markets, Jefferies, PNC Capital Markets, Ramirez & Co, and RBC Capital Markets. 

Another $292.8 million of non-AMT bonds are structured with serial maturities between 2026 and 2046 and term bonds due in 2050 and 2056. Senior manager is Raymond James, co-senior manager is Loop Capital Markets, and co-managers are Blaylock Van and Mesirow Financial. 

Co-bond counsel for both issues are McCall, Parkhurst & Horton and West & Associates. Co-municipal advisors are Hilltop Securities and Estrada Hinojosa. 

Poinsatte said the airport will continue to use interim financing for its capital program and will be returning to the municipal market with big bond deals annually.

Debt issuance will account for 88% of the program through fiscal 2030, according to an investor presentation for the upcoming deal. 

Fifteen miles east at Dallas Love Field, the expansion program for the Southwest Airlines hub is aimed at accommodating nearly 12 million passengers by 2040, although the airport is restricted from adding to its existing 20 gates. A design phase is scheduled to begin in 2026, with construction starting in 2027.

"It will be the biggest program in the airport's history," Patrick Carreno, the Dallas Aviation Department director, told the city council last month. "It'll have a billion dollar number tied to it, but we will share that back when we're done with our advanced planning and we return to the city council."

Total passengers at the airport totaled 4.9 million in the first seven months of 2025, down more than 6% year-over-year. In July, nearly 98% of passengers were on Southwest planes, with Delta Airlines accounting for the remainder.   

More than 30 miles northeast of Love Field, general aviation McKinney National Airport broke ground in July on a passenger terminal that will allow it to commence commercial airline service. The 46,000-square-foot terminal will have four gates to serve 200,000 passengers annually and capacity to expand to six gates. The $79 million project, which includes other facilities, was partly financed with sales tax revenue bonds.

A proposal to issue $200 million of general obligation bonds for the project was rejected by McKinney voters in May 2023.