Participants in last year's historic $2.4 billion public-private partnership to fund a $4 billion development of New York City's LaGuardia Airport hope the unique deal fuels similar bond transactions at other U.S. airports.
Contributors who took part in the record-breaking P3 stressed during The Bond Buyer's National Outlook Conference in Manhattan Tuesday that the deal's success shows that private sector involvement is achievable for airport projects. The June 2016 sale, which was closed by conduit issuer New York Transportation Development Corp. on behalf of LaGuardia Gateway Partners, is the largest P3 to date, largest airport transaction and largest alternative minimum tax transaction brought to the municipal bond market. The 1939-built airport is operated by the Port Authority of New York and New Jersey.
"It was a very competitive bidding process because you see so few airports in the United States involving a private sector operator," said Frank Sacr, head of infrastructure finance at Societe Generale, which was one of the financial advisors on the deal.
Ronald Grosser, partner at Hawkins Delafield & Wood LLP, which assisted as bond counsel during the underwriting process, said airport P3s have great potential around the country, but will work best in a high density population zone like New York City where there is high demand for air travel. Grosser said a key to making the LaGuardia P3 work was setting up construction in four phases so that the airport could still function and allow revenues to keep flowing in. He said that revenue model enables reduced capitalized interest.
"It continues as a revenue-generating facility," said Grosser. "As each phase is implemented there is an ability to increase revenues through increased rates to the airlines because they are taking advantage of the new facilities."
Neal Attermann, director at Citi, which was a lead manager on the deal along with Wells Fargo and Barclays, said an aggressive marketing strategy to educate investors about the unique aspects of overhauling a major airport was important and will be needed for other similar deals to thrive. Attermann said the team conducted numerous one-one-one investor meetings in New York, Boston and Chicago.
"We worked very, very hard with the marketing," said Attermann. "We were on the road a lot."
