DALLAS – Phoenix is preparing to issue $117.9 million of bonds for Sky Harbor International Airport.
The bonds are expected to price Nov. 17.
The two-part deal will include $98.5 million of Series A airport bonds to take out commercial paper and $19.4 million of refunding. Both tranches are secured by the city's junior lien.
Standard & Poor's rates the junior lien A-plus, a notch lower than the AA-minus senior-lien bonds. Outlooks on both are stable.
"The ratings reflect our view of the airport's solid market and near-monopolistic position as the primary airport in the state, low cost structure, experienced and effective administrative team, and solid financial performance," said Standard & Poor's credit analyst Mary Ellen Wriedt.
Moody's rates the junior-lien bonds A1 and the senior-lien bonds Aa3. Outlooks are stable.
"The stable outlook is based on the improving operational and financial performance at the airport which balances the expectation of higher debt and construction risk associated with the capital plan," Moodys analyst Earl Heffintrayer wrote.
Proceeds of the 2015A bonds will be used to refund the commercial paper used for the recently completed Sky Train. The 2015B proceeds will refund 2010B airport revenue bonds. Proceeds of both series will additionally be used to pay issuance costs and fund deposits to the debt service reserve fund.
Both stages of the Phoenix Sky Train project were completed on time and below budget, according to Moody's. It connects the airport's terminals, the airport's largest parking lot and the regional light rail line.
"As a result of the train's successful completion, there was a 9% increase in east economy parking, a positive for airport revenues," Heffintrayer said.
The airport is vulnerable to routing decisions by its dominant carrier American Airlines, which accounts for 51% of Sky Harbor's traffic, analysts said.
In 2013, Sky Harbor ranked as the 11th-largest U.S. airport in total passengers according to Airports Council International.
In October 2014, the Phoenix City Council approved a $103 million construction contract to begin the renovation Sky Harbor's Terminal 3. The phased modernization of the terminal is expected to cost $560 million, with completion anticipated in 2020, officials said.
The city has letters of credit with Barclays and Bank of America Merrill Lynch of $100 million each.
"Currently, we have $140 million outstanding," said Kathleen Gitkin, deputy finance director for the city. "This current sale will refund a $100 million that was issued in October 2014 for development of the Sky Train. The balance of $40 million, issued in June 2015 for Terminal 3 modernization, will remain outstanding."
In October, James Bennett became Phoenix's new aviation director in charge of Sky Harbor, Phoenix Deer Valley, Phoenix Goodyear and membership in the Phoenix-Mesa Gateway Airport Authority.
Bennett had been president and chief executive officer of the Metropolitan Washington Airports Authority, and had also been chief executive officer for the Abu Dhabi Airports Company, overseeing five airports, as well as president of his own consulting firm providing consultation for both foreign and domestic transportation companies.
