The Wayne County Airport Authority, which operates Detroit Metropolitan Wayne County (DTW), has closed on a refinancing program that will yield a present-value savings to the authority of $51.7M.
It is the first time the WCAA has been in the public market since 2008; the refinancing involves the sale of $838,745,000 of new DTW bonds to refund $866,085,000 of outstanding bonds. The savings will lower the future cost of the airport authority debt service, as well as give increased budget flexibility.
“This refinancing program will benefit the traveling public and the airlines by reducing
the cost of operations at Detroit Metropolitan airport,” says WCAA Interim CEO Genelle
Allen. “We are thrilled with the results. While it was a complex effort involving various
steps and elements, in the end this initiative proved to be very cost-effective for the
airport authority.”
The bond refinancing consisted of three principal components. First, fixed-rate bonds in
the amount of $231,285,000 were sold, bearing coupons between 2% and 5%,
to refund fixed-rate debt that had been sold in 1998, maturing out to 2018, with coupons
as high as 5.375%.
Second, WCAA took advantage of a provision in the American Recovery and
Reinvestment Act that allows airports to sell debt not subject to the alternative
minimum tax to refund AMT-eligible debt that had been sold in 2008. To take
advantage of this provision, which is set to expire at the end of 2010, WCAA sold fixed-rate debt in the amount of $216,460,000 of new debt to refund outstanding variable rate
debt. The interest rate differential between AMT and non-AMT debt in the fixed-rate
market is approximately 75 basis points across maturities.
Third, the authority issued $391,000,000 of variable rate debt to refund long-term bonds,
also sold in 1998, with maturities from 2023 to 2028 in the amount of $270,135,000 and
carrying coupons of 5%, and also to refund certain other outstanding variable
rate debt, sold in 2008 as AMT debt that could be refunded as non-AMT before the end
of this calendar year.
“We took advantage of both interest rates and the economic stimulus program to reduce
the cost of debt service as an overall part of our operating costs,” says WCAA Chief
Financial Officer Thomas J. Naughton. “Once we went to market, the outcome was
actually more beneficial than we had initially envisioned.”
In addition to refinancing several of the authority’s airport bonds, WCAA also terminated
all of its approximately $162M of interest swap exposure in December, taking advantage of a provision it had built into its swap program, executed in 2003, to terminate its interest rate swaps at par or at zero cost to the authority in 2010.
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