DALLAS — Houston will make another attempt to issueup to $125 million of airport system revenue refunding bonds after the market turned against the deal in August. The city is expected to go to market next week with the subordinate-lien bonds in a negotiated sale led by UBS Securities LLC.First Southwest Co. and Estrada Hinojosa & Co. share duties as financial advisers. The law firms of Vinson & Elkins LLP and Bates & Coleman PC are bond counsel.The 2007A bonds will permanently refinance a portion of the system’s outstanding commercial paper notes and special facility bonds, officials said. The upcoming issue carries ratings of A-plus from Fitch Ratings and Standard & Poor’s. Standard & Poor’s upgraded the debt from A to A-plus in anticipation of the August issue. Moody’s Investors Service rates the debt A1.The Houston Airport System, which is owned and operated by Houston, operates the city’s three airports: George Bush Intercontinental Airport-Houston, William P. Hobby Airport, and Ellington Field.The airports’ capital improvement program from fiscal 2008-2013 is expected to include about $1.9 billion in projects, of which $850 million will be debt financed through a combination of commercial paper and revenue bonds.In upgrading the debt, Standard & Poor’s cited the system’s plan to limit commercial paper to $150 million and “strong enplanement growth trends, airline concentration, and a rising cost structure.” Cost per enplaned passenger in 2006 was $11.54 at GBIA and $8.52 at Hobby. That represents a slight increases over 2005 figures. In November 2006, Hobby began collecting a $3 passenger facility charge and is approved to collect $163 million over 10 years. GBIA has no passenger facilities charge and no plans to implement one. Continental Airlines’ Terminal E at George Bush Intercontinental serves as an international connection hub to Latin America and other destinations. The terminal was financed with bonds issued in 2001 backed by Continental revenues.Houston-based Continental, the world’s fifth largest airline, earlier this month announced that it will launch nonstop flights to London/Heathrow from GBIA. The airline will continue to offer nonstop flights to London/Gatwick.Fitch cited the underlying financial strength of Continental for the upgrade, saying the new rating is more in line with the carrier’s B-minus issuer default rating.The airport system also issued bonds in 2001 for a 250-acre consolidated rental car facility at GBIA and are supported by customer facility charges on vehicle renters at the airport. The $3 charge can per rental car can be adjusted annually.Enplanements at the aiport increased at a 6% rate from 2002 to 2006.George Bush Intercontinental, which opened in 1969, is Houston’s dominant airport, covering 10,000 acres about 22 miles from downtown. Hobby is about seven miles southeast of downtown on 1,500 acres. Ellington, an Air Force Base partially operated by the city, is a 2,000-acre facility 15 miles southeast of downtown.
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