LOS ANGELES WORLD AIRPORTS WILL
ride a ratings upgrade when it prices $650 million in subordinate revenue bonds on Wednesday .. . . . . . . . . . . . .
LOS ANGELES — Los Angeles World Airports will ride a ratings upgrade when it prices $650 million in subordinate revenue bonds on Wednesday.
This deal will help fund milestone payments to the private partners on the automated people mover a private partner is building to move travelers to the airport, according to Ryan Yakubik, the airport’s chief financial officer. It will also fund terminal construction and renovations.
The Los Angeles Department of Airports will price the deal in two tranches, a $483.3 million Series D AMT and $166.7 million Series E non-AMT.
JPMorgan is lead manager, with Loop Capital Markets and PNC Capital Markets as co-managers. Bond counsel is Dentons U.S. LLP. Disclosure counsel is Polsinelli LLP. PFM Financial Advisors and Frasca & Associates LLC are co-municipal advisors.
LINXS, the five-member private consortium building the 2.5-mile people mover, sold $1.2 billion in private activity bonds for the project in June through conduit issuer California Municipal Finance Authority. The deal was 6.7 times oversubscribed.
“It’s tough to say if these bonds will see as much, or more interest, than the private activity bonds, given the differences in the bonds,” Yakubik said. “The backing and the risk are different. We may see a totally different population of investors on this.”
The LINXS bonds came with a BBB-plus rating from Fitch Ratings. LAX debt has much higher ratings, buoyed by an upgrade ahead of this week’s deal.
Moody’s Investors Service upgraded LAX’s $3.4 billion of senior revenue bonds to Aa2 from Aa3 Monday and $2.7 billion of subordinate revenue bonds upgraded to Aa3 from A1. .
This week’s subordinate bonds come with AA-minus ratings from both Fitch and S&P Global Ratings. All three rating agencies assign stable outlooks.
The airport serves 85 million passengers a year, so trying to fix that environment while managing the airport is challenging, Yakubik said.
“We know we have to fix it, and part of that process has to be ‘please excuse our dust,” Yakubik said. “We are very focused even through the construction that we maintain passenger access to the airport. These projects are the only way we can make it better.”
On Oct. 18, the airport board approved Oct. 18 a $2.028 billion, 28-year contract for L.A. Gateway Partners to design, build, finance, operate and maintain the airport’s consolidated rent-a-car facility.
The ConRAC facility will be connected to the automated people mover, which will eliminate the need for rental car shuttles to access the central terminal area. With the removal of rental car shuttles, LAX will see a reduction in shuttle traffic. ◽
A traveler at Los Angeles International Airport last week. The city’s airport department is pricing $650 million of subordinate bonds Wednesday.