SAN FRANCISCO — San Francisco International Airport will sell $450 million of refunding bonds this week in a quick follow-up to a deal earlier this summer in order to take advantage of a favorable market.

The San Francisco Airport Commission, which oversees the airport for the city and county of San Francisco, will price Wednesday an estimated $170 million of alternative minimum tax bonds, $190 million of non-ATM debt, and $90 million of taxable paper.

The deal — the largest expected this week — comes just after a similar sale of $350 million of refunding revenue bonds at the end of June, when interest rates were around 100 basis points higher and the airport still saved about $12.5 million.

"We move very quickly to take advantage of market conditions," said Chloe Weil, the airport's debt manager. "The global financial uncertainty for the broad economy as a whole is troubling, but for us, with interest rates so low, it has provided this opportunity."

Weil said it took just two weeks to ready the offering.

She said the sale is very sensitive to market conditions and the size and timing could change if the market moves as little as 10 basis points.

Cindy Nichol, the airport's finance director, said: "We currently think that based on today's rates with fairly aggressive scales we could take out $450 million at 3% savings."

On Friday, the 10-year municipal yield held at 2.15%, its lowest level ever recorded by Municipal Market Data. The two-year municipal yield remained at 0.30%, its lowest yield in more than 40 years. The 30-year muni yield ticked up one basis point to 3.79%.

"I think it is going to be a good sale since there has certainly been a lack of supply this summer in California," said John Kim, a principal at investment bank De La Rosa & Co. in Los Angeles. "I think with the size we are anticipating, between $450 and $500 million in bonds with a very well-received name like San Francisco, we expect to see a strong reception."

De La Rosa is the lead manager on the deal and Citi and Morgan Stanley are co-managers.

The proceeds will current refund some bonds and advance refund others.

Nichol said a broader goal is to take out $51 million of variable-rate debt backed by the Belgian bank Dexia and to terminate interest rate swaps.

"In a low interest-rate environment where we can fix out, it just makes sense," Nichol said.

Around 11% of the airport's debt will be variable rate after the deal.

The airport plans to terminate a swap contract with JPMorgan Chase & Co. tied to $30 million of bonds at a cost of $4.8 million, Moody's Investors Service said in a report Friday.

Moody's said the airport has a swap portfolio of more than $500 million with a current market value of $80 million in favor of counterparties.

The rating agency said the airport's debt levels and cost structure are well above its U.S. airport medians and are projected to remain high.

However, Moody's said the airport's strong position in the San Francisco Bay Area, diversified carrier base, and strong liquidity offsets the substantial financial risks.

The airport has an underlying rating of A1 from Moody's and an A-plus from Standard & Poor's and Fitch Ratings.

Before the June sale, Standard & Poor's upgraded the airport's rating.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.