NEW YORK, Feb 14 (IFR) - At least two European banks have
floated the idea of applying a UK-style whole-business
securitisation approach to finance the US$3.6bn overhaul of the
United States' LaGuardia Airport, according to sources with
knowledge of the proposals.
The overhaul project is one of the biggest so-called public
private partnerships (PPPs) to be undertaken in the US airport
The Port Authority of New York and New Jersey has narrowed
competition down to four teams of high-profile private-sector
bidders who are vying to take on the project. However, the
financing options are far from being finalized.
While the type of financing has not been decided yet - and
may ultimately include municipal bonds - at least two European
banks have proposed the idea of securitizing the lease cashflows
from a new set of shops and concessions planned for the
Additionally, income from landing fees - including penalty
charges for flights taking off or landing late - may be
securitized as well, the sources said.
"LaGuardia would make so much money if they chose the
securitization option," said the head of ABS at an international
bank. "It seems like such an obvious option. Other airports have
used this concept to great success."
Additionally, developing a shopping, dining and
entertainment complex at the airport - which would bring in
increased lease cashflows to be securitized - would make the
airport a destination for patrons other than those taking
flights. Hong Kong International Airport is one example of
successful execution of this type of concept, the banker said.
"Securitization would be an attractive route for LaGuardia
to come to market, and it would be an interesting evolution in
the US infrastructure market", said another senior UK-based DCM
banker. "The same drivers exist in the US as in the UK to
utilize that funding structure. It's just that the UK has a
different legislative/regulatory environment, and is more
UK airports operator BAA, owned by Grupo Ferrovial, used
whole business securitizations, which securitize all of the
operating assets of a brand, for infrastructure projects on its
airports, including Heathrow.
Similarly, The AA, a UK roadside recovery business, priced a
whole business securitization last summer. "There is scope to
look at these UK examples and find better solutions and funding
platforms rather than a more vanilla option in the US," the DCM
banker said. "However, it might have to be in an amended form,
given the different regulatory environment in the US."
The main advantages of a WBS-style structure would be to
provide so-called ringfencing around the assets, as well as an
element of ratings uplift or leverage uplift, the bankers said.
A WBS financing would provide additional protection to
creditors, and would present a non-recourse financing around the
A securitization framework would also insulate the sponsors
from perceived credit risk, the bankers added.