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DFW's $2B deal provided safe landing plan for big airports in a pandemic

This article is part of a series spotlighting The Bond Buyer’s ten 2020 Deal of the Year award winners, running from December 9 through 15. One of these honorees will be chosen as our national Deal of the Year at a virtual event taking place December 16. For more information on the Deal of the Year winners and how to obtain a complimentary pass for the virtual event, click here.

In a rapidly changing environment fraught with uncertainty, Dallas-Fort Worth International saw an opportunity to accelerate its refunding plan and design a glide path for other large airports.

Over 16 days in July, DFW priced $2.045 billion of bonds in three transactions, a dramatic compression of the previous plan to price the debt over a four-month period, earning it recognition as The Bond Buyer's Deal of the Year for the Southwest Region.

Due to the impact of COVID-19, DFW designed a strategy to structure more savings in fiscal years 2020 through 2023 to offset lost passenger and airline revenues. Ultimately, the airport, owned jointly by the cities of Dallas and Fort Worth, lowered its debt service payments in the coming four years by $134 million in the heavily oversubscribed transactions.

Dallas-Fort Worth International Airport

In the end, DFW achieved total savings of $613 million and net present value savings of $471 million or 24.4% over the life of the bonds. The refunded commercial paper was originally used for interim financing primarily for the construction of four new gates at the south end of Terminal D, DFW's new Integrated Operations Center, and several airfield projects.

DFW was the first major airport to issue a large volume of bonds during COVID-19, mapping the market for seven other major airports also seeking to ease debt service in 2021 and beyond while improving liquidity.

“The impact of COVID-19 beginning in mid-March was devastating to the airport industry with most airports operating at 90%-95% less passengers in April 2020 versus April 2019,” the nominating statement from the finance team says. “Market acceptance of transportation credits, particularly airports, was almost non-existent in April and early May. Believing the worst operating months were behind, the DFW team believed the airport could access the market and take advantage of the historically low interest rate environment.”

Recognizing the need to restore investor confidence, DFW aggressively disclosed the developments on the Municipal Securities Rulemaking Board's EMMA Web site. DFW published four comprehensive voluntary disclosures on March 23, April 9, May 7 and June 4 to keep investors apprised of DFW’s situation and actions taken. The 2020A preliminary official statement included 12 pages of COVID-19 disclosures and scenarios. The web-based investor presentation included 61 pages of information. DFW held 25 individual investor calls for the three transactions.

"Many investors told DFW the disclosures were so comprehensive that they had few questions and that the disclosures gave them confidence to invest," the finance team noted.