Greater Asheville Regional Airport Authority
Airport System Revenue Bonds, Series 2023 (AMT)
April 27, 2023
Purpose. Bonds issued to fund a portion of the costs of the expansion and modernization of the Authority’s existing terminal and a new control tower.
Credit Ratings.Underlying ratings were affirmed by Moody’s and Kroll at Baa2 and A+, respectively, despite a material increase in the cost of the terminal project vs. 2022 projections.
Structure. Serial bonds from 2027 to 2043 and term bonds in 2048 and 2053 structured with level debt service. SWS analyzed the use of bond insurance, which proved to be beneficial from both a cost and marketing perspective, and was ultimately used on the entire transaction. The Authority elected to utilize a surety policy for the required DSRF deposit.
Market Conditions. The week prior to pricing saw a return to municipal market volatility as MMD experienced double digit daily cuts as muniscaught up with their recent outperformance of Treasuries and the market struggled to absorb a large $12.5 billion calendar. For the week, MMD saw increases of 22 to 44 bps. The municipal market stabilized in the days leading up to pricing, with minor cuts on the front end of the curve (where the Authority did not have bonds) and bumps of 3 bps in 2033 and longer.
Marketing and Pricing Strategy. SWS led a comprehensive marketing campaign which included an SWS re-designed and expanded investor roadshow and 1-on-1 investor calls. The slides-only investor roadshow was viewed by 57 different investors, 40% of which ultimately submitted orders. SWS organized 5 one-one-one calls with investors, with 4 of those investors placing over $143 million of orders for the Authority’s bonds. SWS evaluated the use of alternative couponing and the effectiveness of bond insurance. The Bonds were ultimately priced with 5.25% coupons in 2039 and longer and bond insurance from AGM on all maturities to attract the widest net of investors. For pre-marketing on Wednesday (April 26), the municipal market continued to remain stable, although Treasuries were off by 3-4 bps, and SWS recommended leaving spreads unchanged from the syndicate’s consensus levels in order to attract yield-seeking investors and create momentum. The stable muni market tone carried over into the morning of pricing; however, Treasuries opened with a weaker tone following weaker than anticipated GDP and weekly jobless numbers. Given the stable tone in the muni market coupled with strong feedback from investors during the pre-marketing period, on the morning of pricing SWS recommended tightening spreads by 1-3 bps in 2039 and longer while leaving maturities on the short and middle ends unchanged vs. pre-marketing levels in order to build a strong book of orders.
Pricing Results. SWS generated over $1.7 billion in priority orders from 56 different investors (10.1x oversubscription) - 34 of which did not buy the Authority’s Series 2022A Bonds or previously report holding the Authority’s outstanding paper. The greatest demand was for the 2048 and 2053 term bonds, which were 15.3x and 12.5x oversubscribed, respectively, with less investor interest in 2029-2034 where subscription levels ranged from 2-3x. At re-pricing, SWS tightened spreads in all serial maturities by 2-10 bps, except for 2031-2033 given lower subscription levels (2.0x). The 2048 and 2053 term bonds were tightened by 13 and 12 bps, respectively. Final pricing spreads were up to 21 bps tighter than the Authority’s Series 2022A issuance for maturities with like coupons and the term bonds were 16-18 bps tighter despite being structured with a lower coupon than the Series 2022A terms (5.25% vs 5.50%).