Miami-Dade County is selling $526 million of aviation revenue bonds this week, as the number of passengers using Miami International Airport continues to bounce back from the pandemic and exceed pre-COVID numbers since the pandemic's low in 2020.
The deal consists of Series A's $263.8 million of tax-exempt bond subject to the alternative minimum tax, Series B's $71.6 million of fully tax-exempt bonds and Series C's $190.5 million of taxable bonds.
Lead manager Siebert Williams Shank was expected to price the taxable piece Wednesday, with the two tax-exempt series slated for Thursday, according to preliminary plans.
The bonds are rated A-plus by S&P Global Ratings and Fitch Ratings and AA-minus by Kroll Bond Rating Agency. The ratings have stable outlooks from S&P and Fitch and a positive outlook from KBRA, after it raised its outlook last week from stable.
Mischler Financial Group, Wells Fargo Securities, Blaylock Van, FHN Financial Capital Markets, Goldman, Sachs & Co., Janney Montgomery Scott and TD Securities are co-managers.
The ratings for the bonds are "a testament to the exceptional leadership of MIA Director and CEO Ralph Cutié, the dedication of our industry partners, and the hard work of the entire MIA team," said Miami-Dade County Mayor Daniella Levine Cava. "Their commitment to operational excellence, financial stewardship, and world-class service continues to strengthen MIA's position as a premier global gateway."
The Series 2025A's expected amortization is 2048 to 2055. The Series 2025B's expected amortization is 2048 to 2055. Finally, the Series 2025C's expected amortization is 2042 to 2048. These amortizations are from an online presentation for investors and are subject to change.
The bond proceeds will be used mainly to reimburse the county for
The bonds are senior lien aviation revenue bonds backed by a rate covenant of 1.2X and an additional bonds test of 1.2X, according to an investor roadshow. They are payable from net revenues from the Miami-Dade County Port Authority properties, which is mainly the Miami International Airport.
The three series of bonds will be backed by a composite reserve fund funded with 50% of maximum annual debt service.
The airport, without the planned bonds, owes between $350 million and $400 million per year in debt service through 2041 and then less than $50 million per year from 2042 to 2049.
Enplaned passengers were up about 122% in fiscal year 2024 compared to their number in fiscal year 2020 and up 23% from their number in fiscal year 2019 at Miami International Airport, according to the investor presentation. Fiscal years start in October of the preceding calendar year.
Fitch Ratings cited the airport's strong position as a leading international gateway with a dominant position for Latin America and Caribbean air services.
Fitch also noted its strategic importance to American Airlines, which Fitch rates B-plus. American has a hub in Miami. Fitch noted the airport's strong cost-recovery framework.
The airport's debt is expected to go upwards in the next few years due to the airport's sizable capital improvement plan, which includes $7.5 billion of approved projects to be phased in through 2035. "Uncertainty about the CIP's size, funding sources, and timing restricts positive rating actions at this time," Fitch said.
"The airport's residual framework ensures all operating and debt service costs are sufficiently covered, independent of traffic performance," Fitch said. The airport enacted a 15-year successor agreement in 2018, ensuring stable financial performance.
MIA's long-term debt is fixed rate and fully amortizing, Fitch said.
The airport is reviewing its capital needs and may add projects that increase the CIP further to about $12 billion through 2043, Fitch said.
KBRA cited the airport's improving financial profile and very strong growth in traffic to explain revising the outlook to positive. KBRA said the airport was an "outlier among many of its large hub peers, particularly in the sunbelt, as it has sustained, if not improved upon, the record enplanement levels experienced in the immediate, post-pandemic environment."
Net revenues in fiscal year 2024 were $510 million, which KBRA described as a "strong 45.8% of gross revenues."
Unrestricted liquidity totaled $586 million on Sept. 30, 2024, equal to 354 days of cash operating expenses. As of the end of January unrestricted liquidity was $573 million.
"Offsetting the aforementioned strengths are still elevated cost per enplanement and debt per enplanement metrics, which may be further pressured by up to $3.8 billion of expected, additional debt issuance through fiscal 2029," KBRA said.
While American Airlines accounts for 60% of MIA's traffic, "the risk of a potential de-hubbing by American remains remote," KBRA said.
Though the airport is exposed to hurricanes and flooding, both it and Miami-Dade County have prepared and continue to prepare for these things, S&P said.
For negatives, S&P cited the airport's large capital plan, significant borrowing needs, high airline cost structure and high airline concentration due to its dependence on American.
The airport, in its investor presentation, said it expects average annual growth of 1.7% in enplaned passengers in fiscal years 2026 to 2031.
Air cargo tonnage increased 5.3% year-over-year in fiscal year 2024, to a record high 2.9 million tons.
The airport projects debt service coverage will decline each year from 1.85X in 2024 to 2031, when it will reach 1.29X.
The airport is currently revising its capital improvement plan, which runs through 2035 to one that runs through 2043. The latter is expected to total about $12 billion compared to the former's $7.5 billion. The new one is being prepared together with the fiscal year 2025-2026 budget, the airport said.
The airport projects that in March 56% of departing flights will be headed to U.S. destinations with the balance going to international locations. From 2019 to 2025 domestic flights experienced stronger growth than international flights at the airport.
Hilltop Securities is Miami-Dade County's municipal advisor and Squire Patton Boggs and D. Seaton and Associates are co-bond counsels on the deal.
