SAN FRANCISCO - The Sacramento County Airport System will bring two series of revenue bonds to market Thursday in a negotiated deal amounting to nearly $110 million after Moody's Investors Service boosted its ratings for the system.
The upgrade affects $153 million in outstanding senior-parity revenue bonds and $54 million of subordinate bonds.
Kevin Carney, a vice president at Moody's, said the upgrade to A1 from A2 applied to both the senior and subordinate bonds and was the first for an airport given this year by the agency.
The move stems, in part, from Sacramento International Airport's strong recovery of passenger traffic following the Sept. 11 terrorist attacks, which resulted in a reduction in travel at many airports.
"They were down just a measly 1% in passenger volume for the fiscal year," Carney said.
The system has a diverse carrier base, but its debt-service coverage from passenger facility charges, which exceeds five times the debt service, is also a factor in the upgrade.
The $92.3 million in Series 2002A bonds will build a five-story, 4,300 space parking garage at Sacramento International. The airport system consists of four airports, including Sacramento International Airport, Mather Airport, Sacramento Executive Airport, and Franklin Field.
Bonds for the parking structure were slated to sell last fall, but the terrorist attacks delayed construction and prompted slight changes in the design in order to meet FAA requirements.
The $17.82 million of Series 2002B bonds are subject to the federal alternative minimum tax and will refund bonds sold in 1989 and 1992.
Financial Security Assurance insures both series of the deal.
Goldman, Sachs & Co. and UBS PaineWebber Inc. are the underwriters. Arimax Financial Advisors Inc. serves as the financial adviser for the negotiated sale. Orrick Herrington & Sutcliffe is bond counsel.
Jamie Shilling, an FSA director, said that the airport is a strong origination and destination facility, with 95% of its four million passengers falling into that category. It also has a broad and growing service base. The average annual growth rate since 1991 is 8.5%, he said.
Hardy Acree, director of Sacramento County Airports, said the passenger count rose 3.1% in June in comparison to the same period a year ago, resulting in the second busiest month on record, with 820,000 passengers.
"Not only have we recovered from Sept. 11, but we are seeing significant growth," Acree said.
On July 1, Mexicana Airlines instituted four flights a week to Guadalajara, the airport's first international service. Southwest Airlines, which accounts for 50% of passengers at Sacramento International, added six daily flights in the months after Sept. 11. The system also began an aggressive marketing campaign to capture a wider market, he said.
One passenger traveled 95 miles from Half Moon Bay, bypassing both San Francisco and Oakland International airport, to fly out of Sacramento, he said.
"We think the campaign is going to pay dividends," Acree said.
Standard & Poor's assigns an A-plus to the deal. It affirmed its A-plus rating on the senior airport revenue bonds and its A rating on the subordinate-lien revenue bonds. Fitch Ratings assigns an A-plus to the transaction.
