BRADENTON, Fla. – Fort Lauderdale-Hollywood International Airport is prepping the fifth major airport bond deal from the Southeast this year in a trend fueled by the improving economy and rising passenger demand.
Broward County, Fla., expects to issue $488.9 million of new and refunding revenue bonds Thursday for its $2.4 billion capital program at the Fort Lauderdale airport, although the sale date could change depending on market conditions, an airport official said.
The offering will fund terminal modernization projects.
The new money portion of the deal is structured with $433.5 million of bonds subject to the alternative minimum tax and a second series of $10.9 million that is not subject to the AMT. Both have 30-year maturities.
A $44.4 million refunding component subject to the AMT, to be issued within existing maturities, is expected to bring present value savings of $6.9 million or 13% of refunded par amount.
Raymond James & Associates Inc. is the book-runner for the syndicate, which includes Ramirez & Co., Jefferies LLC, Morgan Stanley & Co., and RBC Capital Markets.
Frasca & Associates LLC is financial advisor. Square Patton Boggs and Perry Thurston PA are co-bond counsel. Greenberg Traurig is underwriters' counsel. Nabors, Giblin & Nickerson and Sanders Legal Strategies & Solutions PA are co-disclosure counsel.
The bonds are rated A1 by Moody's Investors Service and A-plus by Standard & Poor's. Both have stable outlooks, and affirmed their A1 and A-plus ratings on $1.5 billion of outstanding airport revenue bonds.
Strong investor interest in the offering is anticipated, according to according to Broward's chief financial officer, Robert "Bob" Miracle.
"We expect most large institutional investors to participate in the deal," he said. "With this deal completing much of our anticipated airport funding needs, we think investors will take advantage of the opportunity to add these bonds to their holdings."
The transaction highlights the strong position of the airport and significant progress that has been made on the capital program, Miracle said.
The feasibility forecast for the 2015 bonds indicates that the county can take on additional debt while maintaining strong financial metrics, he said.
"Our airline cost per enplaned passenger is one of the most competitive in the industry at $4.52 in 2014, and it will remain very favorable in the $6 to $7 range as all of the debt service related to the capital improvement program comes on line," he said.
After the bonds are sold, Broward will have issued more than 85% of the debt funding for its capital improvement plan.
Completed projects include an $826 million, 8,000-foot-long runway that came in on time and under budget in the fall of 2014.
"After this deal, we will only need to fund $235 million of remaining terminal projects and $44 million of airfield projects with future bonds," Miracle said.
Rating analysts noted that Fort Lauderdale-Hollywood's debt profile is rising, but they also said the airport sees strong demand for service in part because of a diverse fleet that includes many low-fare airlines.
The top three low-cost carriers are JetBlue with 20.4% market share, Spirit with 18.6%, and Southwest with 18.3%.
The low cost per passenger is forecast to peak at $6.90 in 2018 and remain competitive relative to peer airports, according to Standard & Poor's.
Fort Lauderdale faces competition from Miami International Airport, which is 23 miles south.
Both airports, however, have capital plans that are backed by record tourism in south Florida.
"We are one of the fastest growing large hubs with enplaned passenger traffic up 9.9% for the first nine months" of fiscal 2015, Miracle said.
In addition to Fort Lauderdale and Miami, passenger and airline growth are also helping to fuel massive capital plans at other Southeast airports, including Orlando, Tampa, and New Orleans.
Lower energy prices are also have a positive influence on the aviation sector and passenger demand, according to an Oct. 5 report by analyst Alan Schankel at Janney Montgomery Scott LLC.
Nineteen of the busiest airports in the U.S. have seen post-recession enplanement growth with gateways such as Los Angeles, San Francisco, Miami and New York's LaGuardia experiencing above-average passenger enplanement growth, Schankel said.
Improving national economic conditions, the stronger dollar driving imports, and sustained lower fuel prices facilitated sustained growth at airports, ports and among toll roads during the first six months of the year, Fitch Ratings said in a report last week on U.S. transportation trends.
At U.S. airports passenger enplanements grew at a solid 3.9% for the first six months of 2015, a stronger level of growth compared with 3.1% growth in 2014, Fitch said.
At the five Southeast airports with major capital plans in motion, Fitch's data for the first half of this year showed passenger enplanement growth at Fort Lauderdale-Hollywood was the highest at 9.5%, followed by a 9% increase at Louis Armstrong New Orleans International Airport where a $760 million capital plan is in progress.
Orlando International Airport, where a $3 billion capital improvement program is under way, saw a 7.6% increase in enplanements during the first six months, while Tampa International experienced passenger growth of 4.39%, which is helping to drive its $2.5 billion master plan.
While Fitch said Miami International saw enplanements grow by 3.59% in the first half of the year – lower than the national average – the airport has seen steady annual increases in passenger numbers since 2010.
While Miami completed a $6.5 billion capital improvement program in 2014 on time and within budget, the airport has embarked on a new, $1.15 billion capital plan through 2025 mainly to complete terminal projects.
"Fitch expects 2015 to show overall improvements in passenger traffic growth of about 3.5% to 4% based on general economic improvement, sustained lower fuel prices and rising seating capacity at most U.S.-based carriers," the rating agency's report said.
Airports serving major markets and/or international gateway operations are expected to continue to be the best performers, Fitch concluded.