BRADENTON, Fla. — Orlando International Airport's $3 billion capital program takes off next week fueled by a rating upgrade, central Florida's booming tourism market, and record passenger arrivals.
The Greater Orlando Aviation Authority plans to issue about $215.15 million of bonds on Wednesday.
JPMorgan is the book-runner.
The deal is the first of several financings GOAA plans in coming years to support portions of the airport's massive capital plan, which includes a multimodal transit facility incorporating public and private passenger train operations as well as a second air terminal to be built as passenger demand warrants.
The transaction will price in a single day because all of the bonds are subject to the alternative minimum tax, though attempts will be made to attract retail buyers to the offering, according to Jon Eichelberger, a managing director at Raymond James.
Raymond James, Frasca and Associates LLC, and National Minority Consultants Inc. are GOAA's co-financial advisors.
"We expect bond funds and insurance companies to be the primary buyers but also anticipate investment advisors to participate," Eichelberger said. "Trading accounts do buy AMT bonds but have not been as active lately."
Proceeds of the bonds will finance improvements and renovations in the existing north terminal, take out lines of credit, and pay capitalized interest as well as costs of the issuance.
The bonds are expected to have 30-year serial and term bonds secured by net airport revenues with a portion of the debt supported by pledged passenger facility charge revenues.
There will be a 10-year optional call provision.
The deal is structured to result in level debt service, and will be supported by the airport's existing, excess cash reserves since the debt service reserve requirement is based on 125% of average annual aggregate debt service, Eichelberger said.
The current reserve requirement is approximately $55.1 million and the current balance is about $62.8 million, he said, adding that the $7.7 million excess balance should cover the required increase for the 2015 bonds.
The offering comes on the heels of an upgrade by Standard & Poor's earlier this month, which raised GOAA's bond ratings to AA-minus from A-plus, eliminating the authority's split ratings, Eichelberger said.
S&P said its upgrade reflected the airport's improved debt service coverage, which is expected to be maintained over the next five years.
The 2015 bonds were assigned ratings of AA-minus by both Fitch Ratings and S&P and Aa3 by Moody's Investors Service. All have stable outlooks.
"I think that's huge for GOAA," said Eichelberger, adding that the upgrade is a testament to the airport's strength and planning. "It brings GOAA's ratings in line with a pretty prestigious group of airports."
Most airport bonds are rated in the single-A category, according to a July report by Kroll Bond Rating Agency.
In addition to financing a portion of the capital plan next week, GOAA is amending and restating its bond resolution to modernize documents and increase security as well as flexibility, he said, adding that existing bondholders' consent to the amendment is being sought.
The $3 billion capital improvement plan has generated interest from potential investors prompting airport officials to conduct one-on-one calls, Eichelberger said.
Through 2023, airport officials expect to finance the CIP with $1.9 billion in bonds, pay-as-you-go funding, state and federal grants.
As "one of the best known destinations in the world," Orlando's popularity has contributed to the airport's strong credit fundamentals, the airport authority's executive director, Phil Brown, said in an online investor presentation for the 2015 bond deal.
Orlando is home to seven of the 10 top theme parks in the nation and the second-largest convention facility, he told prospective investors.
The central Florida region drew a record 62 million visitors last year.
Planning for improvements and expansion at Orlando International Airport has been done in a "modular fashion" to monitor and prepare for growth but not to overbuild, said Brown, whose background is in public finance with prior stints at Public Financial Management and PaineWebber, which was later acquired by UBS AG.
While some portions of the capital improvement plan are already under construction, the timetable for work on other portions such as the south terminal will be driven by passenger demand.
OIA saw a record 37 million passengers over the past 12 months.
That growth prompted GOAA to begin early planning and design for the south terminal, where the multi-modal transit facility will be co-located and linked to the existing north terminal by an automated people mover.
Actual construction on the south terminal will commence when passenger demand reaches 38.5 million annual passengers.
Work toward building the multi-modal transit facility is already under way. It will bring the first passenger train service to the airport linking Orlando to Miami via the private All Aboard Florida project.
The transit facility also includes future plans to bring the local commuter SunRail train to the airport, though funding for it has not yet been determined.
In mid-2016, the airport authority plans to return to the market to issue about $220 million for airport improvements in a transaction that will include non-AMT bonds.
RBC Capital Markets is the co-senior manager for the current offering.
Co-managers are Jefferies, Loop Capital Markets, Morgan Stanley, Ramirez & Co. Inc., and Wells Fargo Securities
Nabors, Giblin & Nickerson PA and D. Seaton and Associates are co-bond counsel. Broad and Cassell is issuer's counsel.
Greenburg Traurig PA and Ruye H. Hawkins PA are co-disclosure counsel. Underwriters' counsel is Foley & Lardner LLP.
GOAA officials said next week's offering was strategically placed on the bond market calendar to come ahead of several larger airport deals slated for October.
Next month's borrowings include up to $2 billion for CIP improvements at O'Hare International Airport and a $526 million deal by Broward County, Fla., to fund ongoing terminal renovations at Fort Lauderdale-Hollywood International Airport.
