LOS ANGELES — San Francisco International Airport plans to go ahead with plans to price $483 million in debt next Thursday even as the airport faces an investigation into a crash landing last weekend that left two people dead and five seriously injured.
Asiana Airlines flight 214, which was carrying more than 300 passengers, crashed into the runway while landing at SFO at 11:30 a.m. Saturday, forcing a closure of the airport and triggering a probe by the National Transportation Safety Board.
The debt sale, which has been planned since late 2012 and represents the first new money deal SFO has conducted since 2009, will proceed as originally scheduled, Kevin Kone, the assistant deputy airport director for capital finance, said in an interview.
“We thought about postponing the sale when the airport closed, but it reopened within two hours,” Kone said. “As operations of the airport resumed, the decision was made to move forward.”
Kone said he hadn’t heard of any concerns from investors about purchasing the bonds, which Citi, the senior banker, has been marketing since Wednesday.
NTSB typically investigates both the crash and the airport when something like this happens, Kone said.
The bonds received A-plus ratings from the three largest rating agencies in rating reports released the week prior to the crash.
“This won’t effect their ratings,” said Mary Ellen Wriedt, a Standard & Poor’s analyst.
The implications of the crash are, from a credit perspective, short-term in terms of the runway being shut down, Wriedt said.
“The amount of the time the runway was closed was relatively brief,” she said. “From a credit perspective, it shouldn’t have any impact on revenues.”
Passengers also tend to spend more money on concessions when flights are delayed, she said.
There isn’t any data at this point on flight cancellations as a result of the crash, but from a short-term perspective the amount of time the airport was closed wasn’t significant enough to affect revenues, she said.
Airport officials are still evaluating the potential cost of repairing damage done to the runway, but it isn’t considered significant enough to impact the airport’s current capital needs, Kone said.
“We have a $300 million commercial paper program, of which $160 million is outstanding,” Kone said. “It should be sufficient to take care of any improvements that need to take place” as a result of the accident.
Roughly $80 million of the bond proceeds will be used to take out some existing commercial paper leaving $80 million outstanding, said Vincent McCarley, one of the airport’s financial advisors, and chief executive officer of San Francisco-based Backstrom McCarley Berry & Co.
The bonds are being issued in five series.
The biggest will be the $365 million series 2013A private activity bonds. The airport will also issue $86.5 million in series 2013B non-AMT/governmental purpose bonds to take out some commercial paper, $12.6 million series 2013C taxable bonds, $3.8 million Series 2013D refunding bonds, and $15 million in series 2013E non-AMT/private activity refunding bonds.
The series 2013 bonds and the series 2013B bonds are callable. The series 2013C, series 2013D and the series 2013E bonds are non-callable.
The bonds are special, limited obligation bonds that will be repaid from the airport’s net revenues and through funds and accounts provided for in the 1991 master resolution.
Citigroup is lead underwriter. RBC Capital Markets, Siebert Brandford Shank & Co. and Wells Fargo Securities serve as co-managers.
SFO’s current A-plus rating puts the airport in good standing relative to its competitors.
“It’s a good rating,” Wriedt said. “They have had good demand and they have had strong growth.”
What makes SFO an A-plus as opposed to a higher rating is that the airport has significant capital needs and a substantial debt burden, which leads to higher costs, Wriedt said.
The only airport that S&P rates higher than A-plus, is Los Angeles International Airport, which holds a AA, she said.
“We have others that are A-minus,” she said.
SFO plans significant capital projects, after positioning itself over the past two decades to be a viable competitor for international air traffic with other West Coast airports.
Capital projects completed a decade ago assured that the airport would be able to accommodate newer, larger planes, such as the Airbus 880.
Unlike competitors, SFO also has not been harmed by the United-Continental merger.
According to Kone, the airport has benefitted from the merger; and is the only major United hub that has experienced a cumulative increase in capacity since 2010, Kone said.
United recently signed five leases with the airport that extend through fiscal 2023 and provide annual rent of $400 million. This year United made SFO the maintenance hub for its Boeing 747 fleet, Kone said.
Kone also doesn’t expect fallout from criticism that has been lodged against Asiana airline in news reports.
The airport benefits as both a high origin and destination for flights coming from the Pacific Rim. In fact, 78% of its flights either originate at the airport or SFO is the destination, Kone said.
