SAN FRANCISCO — The San Diego County Regional Airport Authority will sell $417 million of subordinate-lien bonds next week to fund part of a $1.4 billion overhaul at San Diego International Airport.
The revenue-backed fixed-rate bonds, which include $133 million of taxable Build America Bonds, are slated to be offered to retail investors on Monday, said Vernon Evans, the authority’s chief financial officer.
Evans said the agency timed the sale to take advantage of the favorable market.
“The main reason that we chose to go with the subordinate is because the subordinate and senior rates are pretty close right now. We thought we would save our senior rating debt for tougher times,” he said.
The authority has only $138 million of outstanding debt, according to Evans. He added that the price tag for the whole expansion includes financing costs.
The bonds will provide continued funding for a terminal expansion, dubbed “the Green Build,” and for part of a capital improvement program for the airport.
The debt will pay for a two-level roadway and 10 new gates at the airport’s Terminal 2 West, various airfield upgrades, and new retail stores and dining throughout the airport.
However, the plan does not address the airport’s biggest capacity constraint — it has just one runway.
The airport, also known as Lindbergh Field, is nestled on a small strip of land between Interstate 5 and the San Diego Harbor.
It’s one of the smallest major airports in the nation, with just 661 acres of land, and is projected to reach full capacity by 2015.
San Diego residents have spent decades debating possible replacements and expansions of the airport.
In 2006, San Diego County voters rejected a plan to build a new commercial airport at the Miramar Marine Corps Air Station, prompting a search for ways to expand capacity at Lindbergh.
Fitch said in a report this week that the airport is still well positioned financially as the primary airport for the San Diego region with a strong passenger base served by diverse airlines, robust finances and healthy liquidity.
Moody’s Investors Service has assigned an A2 rating to the debt, Standard & Poor’s an A, and Fitch Ratings an A. All have a stable outlook.
But Fitch said concerns include a large capital plan with nearly $550 million in borrowing, making the airport more dependent on enplanement and concession revenue growth over the next five years.
Annual debt-service obligations are expected to grow from $5 million in fiscal 2011 to $79 million in five years, Fitch said.
Siebert Brandford Shank & Co. will lead the underwriting of the sale.
The airport’s bond counsel is Kutak Rock and their financial adviser is Frasca & Associates.
