DALLAS — The Alliance Airport Authority Inc., Tex., will go to market Wednesday with $245.15 million of special facility revenue bonds to current refund bonds that were initially issued in 1996 to finance an express cargo sorting facility for Federal Express Corp.
The Alliance Airport, which is owned by the city of Fort Worth, was the first purely industrial airport in the Western Hemisphere.
As a joint owner of Dallas-Fort Worth International Airport with Dallas, Fort Worth signed bond covenants that prohibit commercial passenger traffic from other airports owned by the city.
As such, the 15-year-old Alliance Airport serves commercial freight and other air traffic, bolstering the burgeoning industrial developments in the so-called Alliance Corridor, located at the northern edge of the Fort Worth city limits.
FedEx opened its hub at Alliance Airport in 1997.
The current refunding will take advantage of low interest rates in the market. When the Series 1996 bonds were issued with a bullet maturity due in 2021, they were priced to yield 6.45%. Goldman, Sachs & Co. was the lead manager.
“The present value savings is expected to be very significant,” said Rob Baird, an executive managing director and head of fixed income for Morgan Keegan & Co., the lead manager on the transaction.
Goldman Sachs serves as co-senior manager. Citigroup Global Markets Inc. and M.R. Beal & Co. round out the syndicate as co-managers.
The Series 1996 bonds traded most recently on Friday; a block of 15,000 was priced to yield 5.996%.
The Series 2006 bonds, which are subject to the alternative minimum tax, will also carry a single bullet maturity coming due in 2021.
Lease revenue paid by FedEx, which unconditionally guarantees the payment of interest and principal on the bonds, covers the authority’s debt service obligations.
“The city owns the sorting facility and FedEx leases it,” Baird said. “Once the bonds have been repaid, the facility reverts back to the airport.”
McCall, Parkhurst & Horton LLP and Kelly Hart & Hallman LLP are the authority’s co-bond counsel, and Fulbright & Jaworski LLP will serve as underwriters’ counsel for the deal. JP Morgan Trust Co. will serve as trustee.
The deal will not be insured. Instead, it will go to market with the same credit ratings as FedEx — BBB by Standard & Poor’s and Baa2 by Moody’s Investors Service.
According to a research report released Friday by Standard & Poor’s, the rating reflects “the company’s strong competitive position in the air express market; an expanded and strengthened presence in ground and trucking transportation; moderate financial policies; and good cash-generating capability.”
The report states that those positive factors are offset by the need for significant capital expenditure and investment requirements in the shipping industry.
The company has, however, been working to diversify its product line. Standard & Poor’s notes that “the most significant recent development in FedEx’s diversification strategy was its $2.4 billion acquisition of Kinko’s Inc., the quick print and document management company, in February 2004. The addition of Kinko’s strengthened FedEx’s retail presence and should provide FedEx with greater access to small-to-medium size customers, a target market for the company.”
