Dallas Love Field Airport Modernization Corporation
General Airport Revenue Bonds Series 2017 (AMT)
December 8, 2016
The proceeds of these bonds will be used to finance the construction cost of a new parking garage at Love Field
On December 8, 2016, Siebert Cisneros Shank senior managed the $116.850 million Series 2017 (AMT) Bonds for the Love Field Airport Modernization Corporation (“LFAMC”), a not-for-profit local government corporation acting on behalf of the City of Dallas. The proceeds of these bonds will be used to finance the construction cost of a new parking garage at Love Field Airport in Dallas, Texas, fund a Debt Service Reserve Fund and fund capitalized interest through 12 months following substantial completion.
The bonds were structured with a 20-year final maturity amortizing in 2019-2036. The deal priced successfully despite being executed in an extremely volatile market. Leading up to pricing and since the U.S. Presidential election, 10-year MMD rates increased by approximately 70 bps and municipals underperformed their taxable counterparts. Continued large redemptions from mutual funds were the primary reason for the higher rates, with the entire municipal curve well behind U.S. Treasury rates. The market rallied and saw a massive movement the week of pricing, with MMD dropping between 6 points on the short end and 16 points on the long end in the 3- to 20-year range the day before pricing. On the day of pricing, the Treasury market backed off by about 5 basis points. Given the market volatility and softness, SCS recommended a yield concession of 5 basis points before entering the order period in an effort to build a book and then reduce yields during repricing once enough orders were placed.
This pricing strategy proved to be highly effective. SCS was able to achieve nearly 6 times over subscription. In total, SCS placed $657.2 million in institutional orders. Additionally, SCS brought 14 new investors to the table who are not current holders of LFAMC’s bonds, including Deutsche Bank Scudder, Delphi Capital Management, and Napier Park Global Capital. A breakout of the investors who participated in the Series 2017 Bonds is shown to the right by investor type.
Based on our successful order period, SCS was able to tighten spreads by between 3 and 9 bps compared to preliminary pricing, achieving tighter spreads than even originally planned during pre-marketing. The transaction achieved a 3.90% all-in-TIC (average life of 12.6 years).