Detroit Metro Airport deal mixes new money and refunding

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Detroit’s airport hits the market next week with $240 million of new money and refunding airport revenue bonds.

Wayne County Airport Authority, which manages Detroit Metropolitan Airport and Willow Run Airport, plans to issue $155 million of new money bonds that are not subject to the alternative minimum tax and $6.4 million subject to AMT. It also plans to sell $36 million of non-AMT refunding bonds and $43 million of AMT refunding bonds.

The new money proceeds will finance projects under the airport’s $900 million, five-year capital improvement program that was approved in August. The airport plans to issue an additional $130 million of borrowing for projects under the program.

“The airport's upcoming investment plans are primarily focused on airfield work with considerable flexibility in timing for implementation,” Fitch Ratings said. Fitch affirmed the A rating on both the senior and junior bonds with a stable outlook. Fitch rates both the junior and senior at the same level because “key credit metrics including leverage and coverage are at very comparable levels.”

The refunding will take out bonds sold in 2008.

Siebert Cisneros Shank & Co. LLC is the senior manager on the deal set to price Tuesday. Miller, Canfield, Paddock and Stone, PLC is bond counsel. PFM Financial Advisors LLC and D+G Consulting Group LLC are the financial advisors.

Moody’s Investors Service affirmed its A2 rating on the senior bonds and A3 rating on the junior bonds with a stable outlook.

S&P Global Ratings affirmed its A rating on the senior and A-minus rating on the junior. The outlook is stable.

The airport has roughly $2 billion of outstanding senior lien airport revenue bonds and $133.7 million of junior lien airport revenue bonds. About 11% is in a variable-rate mode.

“We expect moderate future debt needs along with increases in non-airline revenues to keep future airline" cost per passenger levels low, said Moody’s.

Enplanements totaled 17.5 million in 2018. The airport said in an investor presentation that enplanements grew by 1.12% in fiscal 2017 from a year earlier. Enplanements are up 1.6% for fiscal 2018 and based on recent consultant projections, enplanement growth is expected to range between 0.9% and 1.4% annually through 2025.

Growth continues to be driven by Delta Airlines and Spirit Airlines. Delta dominates market share with 73% of airport enplanements, but all domestic carriers have contributed, the airport said. The north terminal gate expansion that is part of the CIP will construct 3 new gates and provide capacity for additional growth.

The authority was created by state statute in 2002 and is a separate legal entity from Wayne County. It is governed by a seven-member board with four members appointed by the county executive; two by the governor; and one by the Wayne County Commission. In July it appointed Chad Newton to serve as Interim chief executive officer.

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Airport revenue bonds Primary bond market Wayne County Airport Authority, MI Michigan