Anatomy of a Deal: Giant sophisticated JFK Terminal 6 deal soared

New York’s airport renovations have been the golden kids of the municipal bond world. After then-Vice President Joe Biden in contrast LaGuardia Airport to a third-world nation, each Queens-based airports have been focused for upgrades.

Demand was so sturdy for bonds for John F. Kennedy Airport’s new Terminal 6 once they priced final October, it was upsized to about $1.9 billion The New York Transportation Improvement Corp. was the conduit issuer. 

The complexity, measurement — it was one of many largest inexperienced financings ever for an airport facility — of the public-private partnership sale helped win the crew The Bond Purchaser’s Deal of the 12 months award within the inexperienced financing class. 

JFK Millenium Companions (JMP), the agency behind the Terminal 6 undertaking, might provide extra debt for the airport as quickly as subsequent quarter, in line with an EMMA submitting. 

JMP went to market final October feeling optimistic, in line with Chief Monetary Officer Mike Sibilia. 

The deal was a significant public-private partnership, its crew had additionally labored on the LaGuardia Airport renovation and was armed with a inexperienced designation from Kestrel. 

Advertising efforts had been intensive, and between excursions of the positioning and one-on-one calls, the crew had gauged important curiosity, Sibilia mentioned. 

When the day of pricing arrived, the deal was greater than 5 instances oversubscribed. It obtained $10.8 billion of bids from greater than 120 completely different patrons, mentioned Sewon Kim, head of transportation at Siebert Williams Shank. 

The deal was upsized by $450 million. 

The deal’s construction was additionally a “house run,” Sibilia mentioned. 

The crew priced $1.85 billion of Collection 2024A present curiosity bonds. 

Based on the deal’s nominating assertion, “The 2024A CIBs have been structured with a sinking fund time period bond in 2054 with a 5.50% coupon, sinking fund time period bond in 2054 with a 4.50% coupon and insured by AGM, a balloon maturity in 2054 with a 5.25% coupon and insured by AGM (Assured Warranty), and a sinking fund time period bond in 2060 with a 5.50% coupon.”

The crew additionally priced $100 million of Collection 2024B convertible capital appreciation bonds, additionally structured as a 2054 sinking fund time period bond and insured by AGM, with a conversion date in December 2054. 

Sibilia mentioned he was stunned on the market’s curiosity within the convertible capital appreciation bonds. 

Based on the crew’s Deal of the 12 months nominating assertion, spreads have been tightened by 2 to eight foundation factors for the 2054 maturities, by 3 foundation factors for the 2060 bonds, and 25 foundation factors for the CCABs. 

Lorne Potash and Sam Nakhleh, of the Assured Warranty crew that insured $920 million of the bonds, mentioned in an announcement “it was an absolute honor and pleasure to work with the completely different events concerned on this undertaking.”

“This was a sophisticated undertaking. Every time you might be bringing a $1.95 billion issuance to market, there are lots of people concerned and numerous experience that’s required,” the assertion mentioned.

Goldman Sachs and Siebert Williams Shank have been the deal’s bookrunners and co- senior managers, with 11 co-managers. Six of the managers on the deal have been minority/girls owned enterprise enterprises, Sibilia famous.

Backstrom McCarley and Berry and Frasca and Associates have been co-municipal advisors. Squire Patton Boggs and HLF have been bond counsels. 

The bonds have been rated Baa3 by Moody’s Rankings and BBB-minus by S&P International Rankings. The Assured-wrapped bonds have been rated A1 by Moody’s, AA by S&P and AA-plus by KBRA. 

The inexperienced designation was a significant factor in broadening the sphere of buyers for the bonds, Kim mentioned. 

Carbon emissions are “the elephant within the room” for airport building, mentioned Alethia Nancoo, companion at Squire Patton Boggs. 

“How are you going to be a inexperienced bond product and construct an airport on the similar time, when [air travel] is the most important agent of greenhouse gasoline emission?” Nancoo requested. 

The JFK and LaGuardia airport renovations have set a “gold commonplace” for lowering the carbon footprint of an airport, Nancoo mentioned. 

Terminal 6 has excessive effectivity constructing methods, round 4,000 photo voltaic panels, a system for stormwater seize and reuse, and 90% waste diversion constructed into the undertaking, Sibilia mentioned. The undertaking is “on the best way” to getting a LEED gold certification and a certification from the Sustainable Websites Initiative. 

This deal was Sibilia’s first time getting a inexperienced bond designation. It was an “intensive course of,” he mentioned, and the crew from Goldman and Siebert was an enormous assist.

The undertaking was additionally one of many largest inexperienced financings ever for an airport facility, Kim mentioned. 

“It simply confirmed the will of buyers and their urge for food to proceed to spend money on transportation infrastructure specifically and airport growth right here in the US,” Nancoo mentioned. 

Many of the JMP crew additionally labored on the LaGuardia renovation, which earned The Bond Purchaser’s Northeast Deal of the 12 months in 2016. Kim and Sibilia mentioned the crew’s expertise helped logistically whereas engaged on JFK and its monitor file has helped entice and reassure buyers and potential airways. 

“On the airline leasing aspect, I could not say sufficient about the advantages we have been capable of derive due to the truth that it is actually in our yard,” Sibilia mentioned.

Sibilia interacts with buyers at JPMorgan’s annual infrastructure seminars, he mentioned. He used to symbolize LaGuardia and noticed numerous curiosity from buyers when he began representing JFK.

“I might converse in regards to the similarities between Terminal 6 and LaGuardia to the buyers,” Sibilia mentioned. “The identical particular person was the one talking to them from each tasks. I believe that sort of interplay was very useful on the investor aspect.”

Terminal 6’s building has come a good distance because the deal, Sibilia mentioned. The terminal’s electrical energy has been turned on, most mechanical methods — like elevators — are put in and being examined and a few of Terminal 7’s operations are occurring on Terminal 6, Sibilia mentioned. JMP has introduced eight extra airline leases because the deal priced.

“It is marvelous how a lot we have been capable of accomplish on this previous 12 months,” Sibilia mentioned. “Placing the preliminary financing behind us, we might dedicate extra effort and time into the leasing aspect and the development aspect.”

Terminal 6 is deliberate to value $5 billion and is scheduled to be accomplished in 2028. The terminal shall be roughly 1.2 million sq. toes with 10 plane gates, a number of lounges, concessions, and connectivity to Terminal 5. 

The upcoming bond issuance would take out the remainder of JMP’s excellent financial institution debt, initially issued in 2022, in line with the disclosure on EMMA. Goldman and Siebert Williams Shank would as soon as once more lead the underwriting crew. RBC is the only bondholder of the 2022 bonds being refunded. 

Kim mentioned the crew is having a dialog with Kestrel about incomes inexperienced bond designation for no less than a part of the upcoming deal. 

Sibilia thinks buyers shall be enthusiastic in regards to the new bonds. He once more spoke with buyers at JPMorgan’s infrastructure convention in April. “They have been asking me the identical query you are asking,” Sibilia mentioned: “When are you going to do one other financing?”