BOND BUYER story: With Buoyant Traffic, Deal Fuels Orlando Airport Capital Plan

Posted on September 21, 2016

By Shelly Sigo

September 21, 2016

BRADENTON, Fla. – With passenger numbers exceeding expectations, officials at Orlando International Airport continue moving forward with a $3 billion improvement and expansion plan.

The Greater Orlando Aviation Authority expects to price a $189.4 million deal on Sept. 29, with most of the financing funding the capital plan.

Co-senior managers are Bank of America Merrill Lynch and Citi.

GOAA's financial advisors are Raymond James & Associates Inc., Frasca & Associates LLC, and National Minority Consultants Inc.

The deal is structured in three series as $84.15 million of tax exempt 2016A airport facilities revenue bonds subject to the alternative minimum tax, and $105.21 million of 2016B non-AMT revenue bonds.

Another $40 million of taxable bonds will advance refund all or a portion of the 2009C and 2010A outstanding revenue bonds for debt service savings.

Proceeds of the new money bonds will finance capital improvement projects to expand the main north terminal complex and construction on an automated people mover to a new south terminal where an intermodal transportation facility will be located.

The bonds are rated AA-minus by Fitch Ratings and S&P Global Ratings, and Aa3 by Moody's Investors Service. All have stable outlooks.

The airport authority is in the beginning phases of the $3 billion capital improvement program, of which 55% is estimated to be funded by bonds, Eric Kazatsky, director of municipal credit research, said in Monday's Janney Fixed Income Strategy & Research.

"The Orlando airport is the sixth-busiest airport in the U.S. serving over 18 million passengers in 2015, a 7.4% increase year over year," he said. "The demand for services has continued into the current year with airport traffic up 10%."

Overall volume on a rolling 12-month basis reached 40.77 million, a new record high for the period, according to airport officials.

Increased seat capacity by a number of airlines is one of the driving factors for the growth, they said.

Orlando, in Orange County, is a mega-theme park destination, which helped fuel the creation of the local SunRail commuter train system that will eventually expand to the airport.

Another feature that brings visitors to the area is the 7-million-square-foot Orange County Convention Center, the second-largest convention facility in the U.S. Chicago's McCormick Place is the largest.

Tourism across the Sunshine state is also on the rise, helping to spur major capital improvements at several airports. Fort Lauderdale-Hollywood International Airport is in the midst of a $2.4 billion capital program. Tampa International Airport on the state's western coast has embarked on its largest capital plan in more than four decades – a nearly $1 billion modernization and expansion effort.

At Orlando, higher traffic triggered the airport authority recent decision to move forward with designing the new south terminal complex, which includes a multimodal transportation facility for rental cars, SunRail, and All Aboard Florida's planned Brightline passenger service to south Florida.

Exactly when All Aboard Florida will begin service to Orlando remains up in the air as the company continues to fight federal lawsuits attempting block its $1.75 billion in private activity bond financing from the U.S. Department of Transportation. All Aboard Florida, owned by Fortress Investment Group, is planning to build a 235-mile route between Miami and Orlando, with stops in Fort Lauderdale and West Palm Beach.

The total project, according to court documents, is estimated to cost $3.5 billion.

Construction on the first segment from Miami to West Palm Beach, which follows an existing freight railroad line, is well under way and largely financed with service expected to begin next year.

However, U.S. District Judge Christopher R. Cooper in a ruling last month called into question whether the company has the financing lined up to complete the second segment of service between West Palm Beach and Orlando without tax exempt bond financing. The Orlando extension will require a brand-new 40 mile rail line from the Atlantic coast. Cooper denied motions by the USDOT and All Aboard Florida to dismiss lawsuits filed by Martin and Indian River counties.

The complaints filed by the counties – the first ever legal challenges of a USDOT private activity bond allocation – can proceed, Cooper said. Martin and Indian River counties oppose the planned 32 daily passenger trains that would run through heavily populated areas within their boundaries, but where no stops are planned.

They also contend that the bond allocation should have been considered in a federal environmental review process, and Cooper agreed. Information that has been produced in the cases raised "legitimate questions" about All Aboard Florida's commitment to completing the segment from West Palm Beach to Orlando without the use of private activity bonds, the judge said.

The "PAB-based financing is not just the 'current financing plan' for the project - it appears to be the only financing plan," Cooper said. "This strikes the court as unusual given the uncertainty surrounding the PAB issue, particularly for a company that has expressed its concern" about keeping the project on schedule and avoiding losses due to delays.

On Tuesday, USDOT and the All Aboard Florida filed responses to the lawsuits, which deny the allegations brought by the counties. The next step in the cases likely will be a decision to hold a trial or a ruling on summary judgment, attorneys for the counties have said.

All Aboard Florida has not indicated when service to Orlando will begin.

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