Guam airport authority bringing $62M Baa2-rated deal

The authority that runs Guam's lone commercial airport is pricing a $62.4 million Baa2-rated deal that will fund a tender offer of some of its outstanding taxable bonds Tuesday.

The Antonio B. Won Pat International Airport Authority is the issuer. Barclays (JJCTF) is the underwriter and Montague DeRose and Associates is the municipal advisor.

The deal consists of $43.3 million of series A bonds, subject to the alternative minimum tax and $19.1 million of series B non-AMT bonds, Barclays Director Sean Keatts said Monday morning.

The proceeds will be used to pay the purchase price of a portion of the authority's outstanding bonds that were offered to tender beginning on Aug. 23 and expired Friday.

Bonds will amortize from 2027 to 2043, with a 10-year optional par call.

"Because of the triple-tax-exemption, we expect strong demand for both series of bonds, but especially for the non-AMT bonds," said Pat Luby, head of municipal strategy for CreditSights, in its Muni New Issue Notes.

The airport's outstanding $193.4 million of revenue bonds are all taxable or AMT-eligible, according to the authority's investor presentation. The airport has no other outstanding debt, the authority said.

When the airport priced $47 million in August 2022, dated July 11, 2023, the AMT bonds maturing in October 2033 were priced at 265 basis points over the Bloomberg BVAL triple-A scale.

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Moody's explains its Baa2 rating, with a stable outlook, by pointing to the airport's monopoly position as a commercial airport for the U.S. territory. It said the debt service coverage ratio will benefit in the near term from lower debt service.

The airport has satisfactory financial metrics, Moody's said. These were buttressed in the COVID-19 pandemic by federal aid, reductions in operating expenses and reduction of debt service.

However, the airport has credit challenges given its small scale and susceptibility to event risks, such as typhoons, Moody's said. It also has comparatively high debt level relative to enplanements.

Enplanement levels have recovered slowly since the pandemic, Moody's said.

The airport's finances are independent of Guam's central government, though it did get some aid during the pandemic.

In the first nine months of fiscal 2024, total enplaned passengers were 25% higher than in the same period of fiscal 2023, according to the airport's investor presentation. The airport had a quick rebound from Typhoon Mawar, which hit in May 2023.

In fiscal 2023 debt service coverage was 1.69 times, the investor presentation said. It had about 200 days cash on hand at the end of fiscal 2023.

The airport's revenues went from $78 million in fiscal 2019 to $44.5 million in fiscal 2021 to $60.4 million in fiscal 2023.

In calendar year 2024, 54% of arrivals came from South Korea and 26% from Japan.

The 2024 United States National Defense Authorization Act includes over $4.2 billion of appropriations as part of a Guam military buildup.

Guam's government has produced a general fund operating surplus every year during Gov. Lou Guerrero's administration, the investor presentation said. General fund revenues were 7% higher in fiscal 2023 than in fiscal 2022.