DFW again sees 27% savings on $482.8M refunding

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In its second major refunding deal in 10 days, Dallas-Fort Worth International Airport again achieved net present value savings of 27% on tax-exempt bonds, officials said.

“We were very pleased with this pricing,” airport chief financial officer Christopher Poinsatte said of Thursday’s current refunding of $482.8 million of revenue bonds. “We knew our initial price wire was aggressive, but still expected a lot of investor interest since we were 8.4 times oversubscribed last week.”

Poinsatte said DFW decided to move its second deal to this week after the July 13 sale attracted 89 investors on an aggressive pricing.

The $459.52 million 2020B deal was structured with 5% coupons through 2033 and 4% through 2045. The bonds are rated A1 with a stable outlook from Moody’s Investors Service, A with negative outlook from S&P Global Ratings, A-plus with negative outlook from Fitch Ratings and AA from Kroll Bond Ratings Agency with watch developing. The bonds are not subject to the alternative minimum tax.

Ramirez & Co. was book-runner on Thursday's sale with RBC Capital Markets as co-manager. Hilltop Securities and Estrada Hinojosa & Co. were financial advisors.

The sale produced net present value savings of $130 million or 27% and cash flow savings of $154.7 million. The yield to call on the 2035 maturity dropped 13 basis points from the 2020A deal on July 13.

Overall, the 2020B earned a yield of 6 to 8 basis points less than where 2020A’s priced last week.

Last week’s deal was the first for a major airport since the pandemic crisis exploded in March, offering reassurance that investors were still hungry for airport credits.

“This is good news for the other airports that are coming to market,” Poinsatte said. “Our long end spreads were 70-72 basis points over very attractive [Municipal Market Data yield curve] rates. I would expect others to see similar rates and spreads.”

“The total refunding savings for the 2020A and 2020B deals totals about $310 million over the life of the bonds,” he added. “This has helped us lower our debt service profile for FY20, FY 21 and FY22 to help the airport keep airline rates in check during COVID-19.”

The two tax-exempt deals give DFW confidence in a $1.14 billion taxable refunding deal coming next week, Poinsatte said.

Morgan Stanley is book runner on that deal, with Barclays and Goldman Sachs as co-senior managers.

The airport's traffic hit bottom on April 16 and has been gradually improving, he noted. "We would expect domestic travel to improve before international."

The airport expects revenue losses of $231 million to $248 million on a budget of $1.1 billion this fiscal year, Poinsatte said.

American Airlines, DFW's major carrier, last week announced it is considering reducing up to 25,000 jobs systemwide, affecting 20% of its employees.

Rival United Airlines, which has a hub in Houston, earlier announced 36,000 potential layoffs.

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Airport revenue bonds Coronavirus Dallas Fort Worth International Airport Board Refunding bonds