CHICAGO The soured U.S. and global economy has killed a deal for a $2.52 billion long-term lease of Chicago's Midway Airport, the city's chief financial officer said on Monday.
Chicago CFO Gene Saffold said the Midway Investment and Development Company, the group that successfully bid on the 99-year airport lease in September, was unable to secure financing, leading to the deal's demise.
"The global economic recession continues to have substantial impact on the availability of financing, which has created serious challenges for many businesses and financial institutions, including those involved in this transaction," Saffold said.
The Midway Investment and Development Company is comprised of Citigroup (C.N) unit Citi Infrastructure Investors, YVR Airport Services Ltd and John Hancock Life Insurance Company.
The failed lease deal is a first for Chicago, which consummated a string of leases, starting with a $1.83 billion deal involving the Skyway toll bridge in 2005. Since then, the city has leased other assets, including parking garages and parking meters in exchange for upfront payments that have allowed Chicago to pay off the leased assets' outstanding debt and provide a financial cushion for the city budget.
The city will retain $126 million in earnest money from the failed Midway deal, Saffold said, adding that $80 million of the funds will be set aside to help balance the city's budget this year and next. Another approximately $6 million will cover the city's transactions costs.
In addition to the money, Chicago retains the right to lease the airport in another competitive offering when financial market conditions improve, according to Saffold.
Midway was the only hub airport to be selected by the Federal Aviation Administration for a pilot program allowing five U.S. airports to be leased to private operators. Chicago planned to use the $2.52 billion upfront payment to retire $1.3 billion of Midway airport debt, while 90 percent of the remaining proceeds were earmarked for infrastructure improvements and city pension funds.
(Reporting by Karen Pierog; Editing by Dan Grebler)