San Francisco airport adds private placements to its toolkit

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The San Francisco International Airport may use private placements as it looks to refund $2.6 billion in bonds over the next five years.

City officials sought the change in policy – approved by the San Francisco Board of Supervisors in September – saying it would lower issuance costs and allow the airport to react more quickly to changes in the market.

The airport has historically sold bonds through public offerings. It has $6.2 billion in general airport revenue bonds outstanding of which $567 million are in variable rate mode and the rest in fixed rate, according to a staff report to the board.

With the change in policy, the board also increased the airport’s bond authorization, which had been $8.44 billion. Of that, $730.5 million had remained unissued. The airport now has $3.35 billion in authorized refunding capacity.

The airport plans to refinance several series of bonds issued between 2009 and 2018 that included refinancings, capital improvements projects at the airport and financing for a hotel near the airport.

Private placements would be one of the options explored subject to the approval of the airport commission. The airport estimated savings between the existing bonds and proposed refunding bonds over the next five years at $102.9 million, according to the board report.

“Private placement provides another financial tool that may provide benefits or reduce risks for the Airport in financing its capital program,” the report said.

Banks may be able to provide advantageous pricing and terms that better meet the airport’s needs and reduce risk, according to the airport.

The city-owned airport is the nation’s seventh busiest and has embarked on a $7.4 billion, ten-year modernization and expansion. Projects include a new air traffic controller tower, renovations to its terminals and a 351-room hotel located on airport grounds.

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Airport revenue bonds San Francisco City & County California