By Daniel Baxter
January 1, 2011 - Wayne County Airport Authority (WCAA),
operator of Detroit Metropolitan Wayne County Airport
(DTW), has closed on an extensive refinancing program
resulting in a present-value savings to the Authority of
approximately $51.7 million.
The refinancing, which represents the first time that
WCAA has been in the public market since 2008, involves
the sale of $838,745,000 of new DTW Airport bonds to
refund $866,085,000 of outstanding bonds. The savings
will reduce the future cost of Authority debt service
and provide increased budget flexibility.
"This refinancing program will benefit the traveling
public and the airlines by reducing the cost of
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 two and five percent, to refund
fixed-rate debt that had been sold in 1998, maturing out to
2018, with coupons as high as 5.375 percent.
WCAA took advantage of a provision in the American Recovery and
Reinvestment Act (ARRA) that allows airports to sell debt not
subject to the alternative minimum tax (AMT) 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.
Authority issued $391,000,000 of variable rate debt to refund
long-term bonds, also sold in 1998, with maturities from
2023-2028 in the amount of $270,135,000 and carrying coupons of
five percent, 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,? said 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 $162 million of interest swap exposure earlier this month. While many entities have been paying many millions to get out of interest rate swaps that had been executed several years ago, WCAA took 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.
Wayne County Airport Authority was established in 2002 by the Michigan
State Legislature, Wayne County Airport Authority (WCAA) is an
independent agency responsible for the management and operation of
Detroit Metropolitan Wayne County Airport (DTW) and Willow Run Airport
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