Florida’s Tampa International Airport will get an infusion of capital from the bond market to continue fueling its $2.5 billion master plan.
The Hillsborough County Aviation Authority, which manages the airport, plans to price $402.3 million of new-money, tax-exempt bonds Tuesday.
Citi is the lead manager and book-runner for the deal, which is one of the largest transactions on the negotiated calendar the week of Oct. 22.
Bond proceeds will finance projects in phase 2 of the master plan, plus $394 million of capital improvement projects.
The projects include an expansion of the main terminal curb, widening of the main parkway into the airport, replacing an energy plant and loading dock, building a new taxiway, upgrading the checked baggage system, airfield improvements, and planning for a new commercial office and hotel complex south of the airport.
The bonds will be sold in three series as $138.7 million of senior revenue bonds submit to the alternative minimum tax, $158.9 million of non-AMT senior revenue bonds, and $104.6 million of subordinated revenue bonds subject to the AMT.
The senior bonds will have maturities between 2022 and 2048, while the subordinate series will mature between 2031 and 2048. Some series are expected to have a 10-year call provision.
Kroll Bond Rating Agency upgraded the airport ahead of the deal. It rates the senior-lien bonds AA, up from AA-minus, and rates the subordinate bonds AA-minus, up from A-plus.
Fitch Ratings and S&P Global Ratings assigned ratings of AA-minus to the senior bonds, which were rated Aa3 by Moody's Investors Service. The subordinate bonds are rated A1 by Moody’s and A-plus by Fitch and S&P. All assign stable outlooks.
“The upgrade reflects the successful completion of 40% of a massive three-phase capital improvement program and management’s discipline to keep costs within budget and on schedule,” said Kroll Managing Director Andrew Clarke.
The upgrade comes as the Tampa airport closed out fiscal year 2018 after serving 21 million passengers, an all-time record high.
The passenger load is a 9.3% year-over-year increase, exceeding growth-rate projections, airport officials said.
Even though leverage will increase because of the capital plan, analysts said the airport benefits from a strong financial profile, a growing national economy, stable overall coverage levels, and a reasonable cost per enplaned passenger.
“We think the deal is going to be very well received by the market,” said Damian Brooke, executive vice president of finance and procurement. “We’ve focus on restructuring our finances, so couple that with what’s happening in the Tampa Bay region and we’re confident it will be received well.”
Brooke, who spoke from New York after a one-on-one investor conference Friday, said Tampa has one of the lowest costs per enplanement of any large airport in the country and the airport has concentrated on increasing non-airline revenue to keep costs low for airlines.
“The airport has really focused on running itself like a business,” he said. “We believe that the investors participating in this deal will be contributing not only to the development of the airport but also the continued development of the Tampa Bay region.”
In a recorded investor presentation, Brooke said phase 1, which totaled just under $1 billion, included the construction of a 2.6-million-square-foot consolidated rental car facility connected to the main terminal by a 1.4-mile automated people mover as well as expansion of the main terminal and complete redevelopment of the concession program.
“Phase 1 will be completed within the next 90 days with the completion of the last remaining concessions and the reclamation of the two floors of the [previous] rental car garage which will be returned to public parking,” he said.
Work on phase 2 has already begun.
“The airport’s strong focus on non-airport revenue generation resulted in more than 77% of total operational revenue coming from non-airport revenues in 2018,” Brooke said.
Tampa also benefits from a diverse airline mix, and saw triple-digit growth in the ultra-low-cost sector, he said.
The airport is served by 20 air carriers. Of the total, seven only serve domestic destinations and 10 serve only international destinations.
Southwest Airlines has the largest market share with 35.6%, followed by Delta Air Lines with 18%, American Airlines with 16% and United Airlines with 10%. The remaining 20% market share is held mostly by low cost carriers, including JetBlue Airways, Spirit Airlines and Frontier Airlines.
Co-managers for the bond issue are Bank of America Merrill Lynch, Morgan Stanley, Raymond James & Associates, RBC Capital Markets and Wells Fargo Securities.
PFM Financial Advisors LLC is the authority’s financial advisor. Holland & Knight is bond counsel.
