JFK’s new Terminal 1 will look to the bond market for long-term financing

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The team developing the new flagship terminal at John F. Kennedy International Airport will tap the municipal bond market for more than $6 billion through 2026, with more debt on the horizon for future phases of the project large scope.

The private New Terminal One consortium overseeing the $9.5 billion development closed a $6.63 billion bank loan on June 10 with a group of lenders led by Mitsubishi UFJ Financial Group Inc. In addition to the loan, the NTO sponsors will inject $2.3 billion in equity, for a total price of $8.4 billion for the first phase of construction.

With funds in hand, the team will open the new 2.4 million square foot terminal this summer, which will anchor the south side of the airport.

The plan is to refinance the bank loan ahead of its 2027 maturity date with several long-term, fixed-rate, tax-exempt or taxable bond issues from mid-2024 or earlier, the manager said. acting NTO financier, Marc McGrady. Taxable options include private activity bonds.

It’s a “bank-bond” strategy that allows the borrower to time the municipal market for the best borrowing rates, McGrady said.

“We plan to be an active tax-exempt market issuer,” McGrady said. “We are fully funded for this initial phase by bank debt and equity, and we intend to refinance this bank debt during the construction period when the market is attractive to us. We actively monitor tax-exempt markets and taxable because we don’t know which one to operate, he said.

A rendering of the interior customs hall of the new Terminal 1 at John F. Kennedy International Airport.

Port Authority of New York and New Jersey

The development is one of four PPPs the Port Authority of New York and New Jersey has launched as part of an $18 billion redevelopment of JFK, one of the nation’s busiest airports and a leading international gateway to design-build-finance US NTO-O&M project is the largest PPP in the United States, with market participants viewing it as a model for other US airports .

The five-year, $6.63 billion bank loan will fund the first phase of the project, called Phase A, which will cover approximately two-thirds of the total development, including a new arrivals and departures hall and 14 out of a total of 23 new doors. It is expected to be open to passengers by 2026. Subsequent stages, Phases B1 and B2, will require additional debt, although the size and shape have not been determined. Completion of the entire terminal is scheduled for 2030.

NTO already has a finance team in place to tap into the market.

Citi will serve as lead manager for the initial tax-exempt agreement, with Loop Capital Markets serving as co-lead manager. Co-managers will include some of the lenders under NTO’s bank financing and several MWBE companies, McGrady said.

The Port Authority’s financial advisor is Frasca & Associates.

Katten Muchin will serve as bond attorney, with D. Seaton and Associates as co-bond attorney. Underwriters’ attorney is Nixon Peabody and co-underwriters’ attorney is Joseph C. Reid, PA

The New York Transportation Development Corporation will act as relay transmitter.

The bonds will be on par with bank debt and will be secured by net revenues from the project and the mortgage on NTO’s lease with the PANYNJ, which runs until 2060. airlines and concessions.

Some PANYNJ payments, like concession revenue sharing and land rents, will be paid before debt service, according to Fitch Ratings.

The bank debt of $6.63 billion is a five-year term loan with two tranches totaling $6.33 billion, as well as a liquidity facility of $200 million, a working capital facility of 50 million dollars and a $50 million security deposit to be borrowed by the New York Transportation Development Corp. ., according to the rating agencies.

Last week’s funding closed days after the PANYNJ board approved a new lead investor in the project at a special board meeting on June 3. Spanish company Ferrovial SA has taken a 96% stake in the Carlyle Global Infrastructure Fund’s 51% stake in JFK NTO LLC. This decision gives Ferrovial a position of control over most of NTO’s management decisions.

Besides Ferrovial/Carlyle, the other private companies are Johnson-Loop Capital Infrastructure, with 30% ownership, and Ullico, with 19% ownership.

“Building this new, state-of-the-art terminal at JFK is key to our vision for a new era in New York City,” Governor Kathy Hochul said in a statement after last week’s financial close.

The $6.63 billion debt comes with low investment grade ratings from three rating agencies. Kroll Bond Ratings Agency assigns a preliminary rating of BBB-/stable. Moody’s Investors Service assigned the rating Baa3/stable and Fitch Ratings rated the debt at BBB-/stable.

“The stable outlook reflects Moody’s expectation that Phase A of the project will be completed with limited delays and that terminal utilization will generate at least a total [debt service coverage ratio] of 1.4 times, including contingent and deferrable payments to PANYNJ under the lease,” Moody’s said in its report.

Fitch said the financing plan “involves an increased debt service payment profile coupled with refinancing risk,” due to the loan underwriting plan with long-term debt, adding that “incremental debt for a future B1 and B2 expansion phase could increase the overall leverage of the project.”

The City of New York owns JFK and leases the property to the PANYNJ under a lease until 2060.

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