May 13, 2016 / 7:45 PM / 3 years ago

$2.5 bln deal for LaGuardia P3 tops U.S. muni sales next week

May 13 - Bonds being priced next week for LaGuardia Airport’s $4 billion renovation will help finance one of the biggest, most complex public-private projects currently underway in the United States.

The New York Transportation Development Corporation will issue $2.5 billion of special facilities bonds on behalf of LaGuardia Gateway Partners (LGP), the consortium that will design, build, operate, finance and maintain the project under a contract with the Port Authority of New York and New Jersey.

Nearly all the bonds, about $2.35 billion, are subject to the alternative minimum tax. The remaining $150 million are taxable, according to a presentation for potential investors.

LGP will repay the bonds using operating revenues from the reconstructed Terminal B, mostly with payments from airlines and concession providers.

Fitch Ratings expects to assign a BBB rating to the bonds.

“It’s the first... true P3 being done in the U.S. airport space with the component,” said Emma Griffith, a director in Fitch’s global infrastructure and project finance group.

Fitch took comfort from the security package for the design-build contractor, she said, as well as the strength of LaGuardia itself and demand for slots there.

The Port Authority decided to use a P3 procurement model largely because that allowed construction risk on the complicated project to be shifted to the private sector, Vice Chairman Scott Rechler said at a March board meeting.

The biggest challenge: the airport will remain open and operational during construction, which will mostly move from east to west as it progresses.

Two island concourses will also connect to a main area by way of elevated pedestrian bridgeways, which reduces the number of construction phases needed, according to the investor presentation.

Separately, the Port Authority will invest $1 billion during construction and another $1.2 billion to fund related new improvement projects, including roadways and a garage to the west.

The Port Authority and LGP expect to execute the lease and reach financial close and operational handover on June 1.

New York area issuers dominate next week’s $11.9 billion of bond and note sales, including an $800 million deal for New York City general obligation bonds.

The state’s Metropolitan Transportation Authority will price $500 million of dedicated tax fund green bonds, certified by the Climate Bonds Initiative.

The Dormitory Authority of the State of New York will also issue $209.2 million of revenue bonds for its school districts financing program.

Reporting by Hilary Russ; Editing by Tom Brown

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