A junk-rated, $350 million special facility revenue bond issue for American Airlines' maintenance facility in Tulsa, Oklahoma, could hit the municipal market as soon as this week.
The Trustees of the Tulsa Municipal Airport Trust bonds will finance or reimburse costs for a more than $400 million project to improve the airline's overhaul and maintenance base located at the Tulsa International Airport, according to the preliminary official statement. The deal led by BofA Securities will also refund $104.2 million of Series 2015 bonds.
The POS shows the bonds, which will be subject to the alternative minimum tax, structured with two yet-undated term maturities.
The bonds are secured primarily by payments made by American under an existing sublease with the airport trust that expires in December 2048, which is longer than the expected final maturity on the 2025 bonds, according to the deal's investor presentation. Debt service payments are also unconditionally guaranteed by American Airlines Group Inc. and bondholders will get a leasehold mortgage on American's interest in the sublease.
Fitch Ratings rated the bonds B-plus, which is below its BB rating for American's secured debt, reflecting "the potential uncertainty in recovery value for creditors if the company chooses to reject the lease in a bankruptcy scenario."
"The bonds benefit from a leasehold interest in American's Tulsa maintenance base," the rating agency said in a report. "However, Fitch views the potential value from re-letting the facilities as less certain than for revenue bonds backed by space at desirable airports or American's other secured obligations."
The Tulsa bonds are better positioned than American's general unsecured debt obligations, Fitch added.
"The Tulsa maintenance base is important to the airline's daily operations, given the maintenance work conducted at the facility," the report said. "A provision also requires the trustee to pursue reletting options in the unexpected event that the lease is rejected in a hypothetical bankruptcy. These factors contribute to relatively higher recovery expectations compared to unsecured creditors."
S&P Global Ratings also rated the bonds B-plus, which is the issuer credit rating it assigns to American Airlines Group.
The airline's 246-acre Tulsa facility is the world's largest commercial aircraft maintenance base, employing about 5,000 to work on airframe and engine maintenance, overhaul, and modifications. It has served as American's primary aircraft maintenance facility since 1946.
In December 2023, the airline was
The deal comes as airport special facility bond issuance grew last year. Houston sold $1.1 billion of bonds
Co-managers for the Tulsa deal are Barclays, Credit Agricole Securities, JP Morgan, Morgan Stanley, SMBC Nikko, US Bancorp, and BOK Financial Securities. Hawkins Delafield & Wood is the bond counsel.
