DALLAS - Dallas-Fort Worth International Airport officials will vote tomorrow on a planto accelerate the airport's five-year, $2.6 billion capital development plan with theissuance of $1.8 billion of airport revenue bonds in the next few months.
"We really want to try to capture better interest rates," said Kevin Cox, seniorexecutive vice president of the airport. "Over the next two years interest rates coulddo lots of things; we felt it was the right time to buy out the remaining capitaldevelopment program and remove some of that uncertainty."
Cox said the airport would also receive the secondary benefit of issuing the remainingdebt needed to implement its CDP while the market is relatively stable. However, thatcould change as the prospects for a U.S. invasion of Iraq grow every day.
"By issuing the debt now while the market is favorable, we expect to realize a savingsof $480 million for the entire CDP," Cox said.
Included in the plan are a new international terminal that is currently beingconstructed and a new rail system called SkyLink, which will connect the airport'sterminals with other facilities.
The decision to access the market now shortens a five-year capital development programto three years. The plan was kicked off with issuances in 2001 and 2002, including thefirst major airport bond sale following the terrorist attacks of Sept. 11, 2001.
The airport has already issued about $1 billion of CDP bonds.
Officials say the first sale of new bonds - about $530 million of Series 2003A bonds -is tentatively scheduled for April and will be senior-managed by J.P. Morgan SecuritiesInc. Salomon Smith Barney Inc. and Estrada Hinojosa & Co. will serve as co-seniormanagers, and Bear, Stearns & Co., Lehman Brothers, SWS Securities Inc., A.G. Edwards &Sons Inc., and Goldman, Sachs & Co. will serve as co-managers.
The second half of the remaining CDP bonds, Series 2003B, would be issued several weeksafter the first series in a deal led by Morgan Stanley. Co-senior managers on that dealwill be RBC Dain Rauscher Inc. and M.R. Beal & Co., and Salomon Smith Barney, MerrillLynch & Co. Inc., Ramirez & Co., Apex Pryor Securities, and Morgan Keegan & Co. willserve as co-managers.
Bond counsel for both tranches will be Vinson & Elkins LLP, McCall Parkhurst & HortonLLP, and Renee Higginbotham-Brooks.
In addition to the $1.6 billion in CDP bonds, the airport will also sell about $120million of variable-rate bonds to finance baggage-screening facilities. Grants from thefederal Transportation Security Administration would be used to repay about 75% of thecost of those bonds over three years, said Cox.
Cox said no remarketing agent had yet been chosen for the variable-rate debt.
"We will issue fixed-rate bonds going out over 30-plus years to pay the $36.4 millionthat makes up our 25% share of the cost of the in-line baggage system," Cox said. "Therest will be repaid over three years as we receive the TSA payments."
Included in the $1.6 billion CDP bonds is $35 million that will finance completion ofnew American Airlines Inc. facilities. Airport officials said they could issue debt forthe airline's projects at lower interest rates because of their stronger credit ratings.
The airport is rated A1 by Moody's Investors Service and A-plus by both Standard &Poor's and Fitch Ratings. Cox said he anticipates that a triple-A-rated bond insurerwill back all three tranches of debt to be sold by DFW Airport in coming weeks.
Traders say that while the uncertainty of the airline industry does create some concernfor debt issued for that purpose, insured deals are still attractive.
"The fact is, most of that debt is insured," said Mike Imhoff, a managing director atthe Hanifen Imhoff Division of Stifel, Nicolaus & Co. "While retail investors tend to becautious with airport debt, insurance takes away a lot of the concern for institutionalinvestors."
American Airlines recently received triple-notch downgrades to B-minus from Standard &Poor's and Caa2 by Moody's. Industry rumors that the airline will file for bankruptcyprotection are on the fly despite statements from American officials that the airline isrestructuring costs to stay afloat and has no plans to declare bankruptcy.
DFW Airport's bonds are backed by passenger facilities charges and airport revenues, butunder the tenant agreement with DFW, airlines using the airport's facilities would coverany shortfalls in the event of a default.
Ratings officials say that if American Airlines were to reduce its schedule from DFWAirport significantly or go away altogether, it would create a major strain on theremaining airlines that DFW serves. However, that load would be shifted as more of thosecarriers took up passenger traffic and flight routes abandoned by American.
