Bonds

Washington airport authority is coming to market with $829 million

The Metropolitan Washington Airports Authority plans to come to market Wednesday with $829.4 million of airport system revenue and refunding bonds.

“Traditionally, we’re in the market at about the same time every year. We either have a refunding opportunity or a new money need,” said Andrew Rountree, the authority’s senior vice president for finance and CFO.

“The refunding opportunity is around $400 million and the new money issues are about $429 million,” Rountree said. “The new money is to fund our ongoing capital construction program.”

A young traveler views airplanes at Reagan National Airport. The airport’s owner, Metropolitan Washington Airports Authority, is selling $829 million of municipal bonds next week.

Bloomberg News

BofA Securities, Inc. is the senior manager on the deal, Frasca & Associates is the municipal advisor and Squire Patton Briggs is the bond counsel.

The deal will consist of tax-exempt bonds with interest subject to the alternative minimum tax. Interest will also be tax-exempt in the District of Columbia and Virginia.

MWAA includes Ronald Reagan National Airport, Washington Dulles International Airport and the Dulles Toll Road, which helped fund the Metrorail’s Silver Line extension to the Dulles airport. 

After the line was completed MWAA turned the management of the Silver Line over to the Washington Metropolitan Area Transit Authority. 

MWAA is seeing a complete traffic and revenue rebound from the pandemic years.

“Our total operating revenues in 2019 which was the last full pre-pandemic year, were about $766 million and our 2023 operating revenues were $853 million,” said Rountree.

A large portion of the revenue increase is tied to non-airline revenues and concessions which are showing a 20.5% net increase over 2022, according to an online investor presentation for the deal. Parking revenues are up 17.5% with food and beverage sales up 28.7% for the same period. Combining the two airports and counting enplaned passengers accounts for 24.3 million in 2019 as compared to 25.1 million in 2023.

The two airports have also benefited from the Infrastructure Investment and Jobs Act by way of the Airport Infrastructure Grants program. “Reagan National has gotten about $22 million each year of the three years for a total of $66.7 million and Dulles International very similarly has $67.7 for AIG to date,” said Rountree.

Dulles also competed for and won Airport Terminal Program grants scoring $51 million in 2022, $20 million in 2023, and $35 million in 2024. 

MWAA’s capital construction plan includes building a new East Concourse at Dulles that will cost $749 million, with a target opening date of 2026. Terminal Two at Reagan is set to receive a $63.9 million makeover that’s set for a 2025 completion. Runway work at Reagan will cost $370.4 million and roll in $125.3 million in federal grant money. 

Ahead of the sale, the authority received rating affirmations from the three agencies that rate the deal. Moody’s Investors Service rates MWAA revenue bonds Aa3, S&P Global Ratings AA-minus, and Fitch Ratings AA-minus. All three assign stable outlooks.

“The rating reflects MWAA’s very strong credit attributes, including the resilience of its complementary dual-large hub airport system serving the strong and growing District of Columbia air trade service area; well-balanced system-wide carrier mix; capital program progression at both airports; and its stable financial profile,” Fitch said in its report.

 ”The Aa3 rating incorporates Moody’s expectation of adequate credit metrics despite the addition of incremental debt to partially fund the recently updated capital construction program. The new airline use and lease agreement, valid until 2039, contemplates about $9.4 billion in construction costs at both airports,” the rating agency said.

“Between 2024 and 2027, the authority plans to issue approximately $4.4 billion of new debt to partially fund this new capital plan and some remaining work items from the previous plan,” Moody’s said. 

Moody’s notes that if the authority’s debt service coverage ratio were to drop below 1.1 a downgrade could result. The authority lists its DSCR’s at 2.77 for 2023, and a forecast of 2.54 in 2024. The number dropped to a low of 1.40 in 2020 during the pandemic. 

“The rating reflects our opinion of MWAA’s aviation enterprise benefiting from resilient financial and demand characteristics through different economic cycles and shocks because of proactive management actions and its dominant role and strategic importance in the surrounding regions,” said S&P Global Ratings credit analyst Kenneth Biddison. 

“Traditionally, we’re in the market at about the same time every year,” said Andrew Rountree, the authority’s senior vice president for finance and CFO.

“The rating further reflects MWAA’s extremely strong enterprise risk profile and strong financial risk profile supported by recent robust enplanements trends, which totaled 25.1 million in fiscal 2023, 12.4 from Dulles International and 12.7 million from Reagan National,” he added. 

According to MWAA as of Dec. 31, 2023, its Aviation Enterprise Fund Liquidity would allow it to operate 1,017 unrestricted days using cash on hand. As of April 1, 2024, the authority reports it has $248.7 million in construction funds and $200 million in a revolving line of credit. 

Current debt projections show a gradual increase from just over $200 million in 2024 to a high in 2031 that still stays below $300 million.

Reagan National serves 108 non-stop destinations, up from 97 in 2019, according to an online investor presentation for the deal. Dulles services 140, down from 144 in 2019. Enplanements for both airports are showing up slightly for the beginning of 2024. 

MWAA is implementing electrification and efficiency initiatives designed to achieve a LEED Silver rating for the East Concourse at Dulles under the U.S. Green Building Council’s ‘Leadership in Energy and Environmental Design’ rating system to evaluate the environmental and sustainability performance of buildings. Silver is the second-lowest of its four tiers.

EV charging infrastructure is also planned along with all electric buses. 

A 100-megawatt solar farm spread across 835 acres near Dulles is also being planned in partnership with Dominion Energy.

Stretching the Metrorail system to Dulles is also playing a role in the airport recovery story. MWAA funded the construction of the rail line with support from the surrounding counties and toll road revenue, which is a separate operating budget from the airports. 

According to Rountree the Dulles station has the highest ridership numbers on the line.

“The airlines in particular, are really excited to have that Metrorail station at our major international airport. It’s the gateway to the nation’s capital,” he said.  

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