CHICAGO — The Detroit Metropolitan Wayne County Airport hits the market Thursday with $287 million of airport revenue bonds that will be used in part to finance a five-year capital plan.
Moody’s Investors Service boosted the airport’s outlook to stable from negative ahead of the deal, citing stable enplanement levels after years of decreases, and the airport’s role as one of Delta Airlines’ most important hubs.
Moody’s rates the airport, and this week’s bonds, A2. Standard & Poor’s rates it A and Fitch Ratings A-minus.
“We’re proud of the strengths of this airport,” chief financial officer Terry Teifer said Tuesday during a conference call with investors that focused largely on the strengths of the credit. “We have a monopoly on our air traffic and trade area, a population of over five million people, the economic recovery has been one of the strongest in the country and we’re clearly a winner in Delta’s strategic hubbing decisions.”
The “best story about the airport,” Teifer said, is management’s ability to cut costs to maintain fiscal stability during a rocky period of falling revenue and enplanements that began in 2008. “We’ve taken a hard look at ourselves and said that it is our job to run an efficient airport and make it a quality place for our airlines to operate,” Teifer said.
Like all credits with ties to Detroit, the airport has suffered from the area’s fiscal and economic problems, including the near-collapse of the Big Three domestic automakers in 2009.
But despite the city’s own problems, the wider metropolitan area is enjoying an economic recovery, officials said. The area has recently led the nation in terms of falling unemployment — though that could be partly due to a shrinking labor force — and General Motors, Chrysler and Ford Motors are showing strong profits.
“The strength of our auto companies and the way that they’re competing in new restructured areas is a strength for us,” Teifer said.
Thursday’s offering is divided into four series. Series A consists of $180 million of new-money bonds that are not subject to the alternative minimum tax and Series B consists of $25 million of new-money bonds that are subject to the AMT. The finance team will refund up to $82 million more of bonds, originally issued in 1998 and 2002.
Citi is the senior manager and five additional firms round out the underwriting team. Public Financial Management Inc. and D+G Consulting Group LLC are financial advisors. Miller, Canfield, Paddock and Stone PLC is bond counsel.
Proceeds from the new-money piece of the deal will be used mostly for airfield projects at the airport, located in the Detroit suburb of Romulus. The airport has two relatively new terminals, one that is 10 years old that is used by Delta, and one that is four years old and used by the airport’s other airlines.
“Going forward, we’re looking at primarily major maintenance to keep our runways up to snuff,” Teifer said.
The airport’s relatively modest capital plan — it totals $566 million through 2017, including this week’s debt — is one of its credit strengths, Moody’s said.
“Moody’s views the airport’s debt funding needs to complete the capital program as modest, given that WCAA’s total airport revenue debt will have been reduced by approximately $200 million by the end of fiscal year 2016,” the ratings agency said in a report on the upcoming deal.
Ratings agencies have historically raised concerns about risks posed by the airport’s reliance on Delta, particularly after Delta’s merger with Northwest Airlines. Delta accounts for 76% of all enplanements at the airport.
Since the merger, however, a “clearer picture” of the airport’s role for Delta has emerged, though some concentration risk remains, according to Moody’s.
Delta, as well as all the airport’s airlines, have signed lease agreements through 2032, boosting stability.
“We don’t just need them, they need us,” said Dina Reed, vice president of financial planning for the airport.
Reed outlined recent enplanement trends for investors, noting that the airport peaked in 2005, at 18.3 million enplanements, before falling to a low of 15.9 million in 2009.
“Since then, the airlines have readjusted and the economy has stabilized and improved, and it is resulting in stable enplanements over the last four years,” Reed said.
The airport is expecting 16.2 million enplanements in 2012 and an average of 1.6% growth annually through 2020.