CHICAGO - After postponing a planned bond issue this week amid ongoing market turmoil, the Wayne County Airport Authority - operator of Detroit Metropolitan Wayne County Airport - hopes to enter a more stable market within the next few weeks with its third refunding issue in the last five months.
The $75 million variable-rate bond issue would take out the final piece of the authority's short-term debt that was tainted either by the collapse of the auction-rate market or downgrades of former triple-A rated monoline bond insurers earlier this year.
Like issuers across the country, the airport postponed its transaction this week amid weakness in the bond market. With the Securities Industry and Financial Markets Association's municipal index resetting to just under 8% last week, the authority opted to hold the deal until rates decline at least 250 basis points, said J. Chester Johnson of Government Finance Associates Inc., the authority's long-time financial adviser.
The bond sale comes as Fitch Ratings revised its outlook to negative from stable on the authority, citing Detroit's economic problems as well as potential declines in the number of passengers at the airport and non-airline revenues. At the same time, Fitch affirmed its A rating on the upcoming debt and $2 billion of outstanding senior-lien general airport revenue bonds.
Standard & Poor's maintains an A underlying rating with a stable outlook on the senior debt. The airport also has about $180 million of junior-lien bonds.
In August, Fitch revised its outlook to negative on the entire airport sector based in part on continued weakness in passenger levels. Wayne County is the first major U.S. airport authority to come to market since that outlook revision, according to Johnson.
The authority plans to issue $74.5 million of variable-rate debt that will carry a letter of credit from JPMorgan Chase & Co. The bonds' interest is subject to the alterative minimum tax. The move would refund two $37 million series of variable-rate debt that carried coverage from Ambac Assurance Corp., which lost its triple-A ratings earlier this year. Those bonds have since all been put back to the bank, Johnson said.
JPMorgan and Citi will each underwrite one series of the bonds.
"After this we expect that the airport will be out of any concerns related to its short-term debt," Johnson said. "This is going to be it for a while. They want to stop worrying about debt management and start running the airport and dealing with the Delta-Northwest merger."
In revising its outlook on the airport authority to negative, Fitch cited in part "uncertainty" surrounding the pending merger of Northwest Airlines Corp. and Delta Air Lines, which is awaiting final approval from the U.S. Justice Department. Northwest dominates enplanements at the Detroit Metropolitan Wayne County Airport - the authority's largest asset - accounting for 76% of its 18.1 million passengers in 2007.
In April, the authority sold $145 million of fixed-rate bonds that refunded a piece of the airport's variable-rate debt that was insured by Financial Guaranty Insurance Co. In June, the authority refunded $330 million of auction-rate securities into variable-rate demand bonds backed by letters of credit from Landesbank Baden-Wurttenberg and Wachovia Bank NA.
A small piece of that debt has since been put back to the banks, Johnson said, adding: "We're expecting those to come out as soon as the market returns."
