Port of Seattle lands outlook increase forward of $810M deal

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Port of Seattle lands outlook increase forward of 0M deal

The accelerated return in passenger demand, combined with federal aid, earned the Port of Seattle an outlook from Fitch Ratings before planning to price $ 810 million in revenue bonds next week.

The agency oversees Seattle-Tacoma International Airport and is 50% owner of the Northwest Seaport Alliance, a sea freight operating partnership between the Port of Tacoma and the Port of Seattle.

“There has been a lot of federal support to airlines and airports that have helped stabilize airlines,” said Moses Kopmar, an analyst at Moody’s. Moody’s revised its outlook for the US airport sector to positive in May. “Airlines are able to add services, and on the demand side, consumers are ready and able to travel.”

An Alaska Airlines departure from Seattle-Tacoma International Airport. Parent Port of Seattle has a $ 810 million bond in the works.

Don Wilson, Port of Seattle

As the lead manager of a six-bank consortium, Barclays will set $ 289 million in income refund bonds and $ 586 million in new money income bonds on June 17 in revenue.

Piper Sandler is a community advisor and K&L Gates is a bond counsel.

The port expects the bonds to be well received by investors and hopes to generate $ 50 million in net present value savings through the repayment, said Elizabeth Morrison, director of corporate finance for the port.

“We like the prices, but they have been attractive for some time. And we like the market view of airports right now, ”said Morrison. “The rating agencies have given other airports a stable outlook and investors are interested in airport loans.”

Airport bond sales in recent months have been well received, said Morrison.

The proceeds from the new money bonds will be used to fund the airport’s $ 4.9 billion capital improvement program.

Key projects include a baggage optimization program and some tent projects that are nearing completion, including an international arrivals hall and the rebuilt and refurbished North satellite terminal with new gates, Morrison said.

She called the $ 4.9 billion a five year snapshot of the capital program because “Airports are like old houses, they have to be constantly repaired and rebuilt. We have new facilities at the airport and other ongoing projects. “

The plans provide $ 47.3 million in first-lien income-refund bonds, which are tax-free and subject to minimum alternative tax; with the balance in intermediate Pfandbriefe, in four series of repayment and new money with different tax statuses.

Fitch Ratings revised its outlook for the port from negative to stable prior to the transaction; it rates the senior Pfandbriefe with AA and the intermediate Pfandbriefe with AA-minus.

Moody’s rates the top-quality Pfandbriefe with Aa2 and S&P Global Ratings with AA-minus; Both agencies give stable prospects and rate the intermediate lien bonds one level lower.

“We are very pleased with the ratings,” said Morrison. “We think it reflects a recovery in the enplanements.”

The coronavirus pandemic has been the dominant story for the airport since early 2020. In a feasibility report, a consultant developed two scenarios that will bring the airport back to pre-pandemic levels in a few years, Morrison said.

Although she acknowledged that there is a lot of uncertainty in the world right now, she thinks the advisor’s goal of recovering to pre-pandemic levels by 2025 is reasonable. It’s also in line with the timeline in which Kopmar said Moody’s expects a full recovery.

“We are still in an environment where it is difficult to have a forecast per se,” said Morrison. “We have provided an outlook for investors if we return to pre-pandemic levels in 2025 and follow our previous pattern of rapid growth and flattening, or if we recover through 2025 but have a slower growth path.”

“We want to be careful when predicting what the future might bring,” she said.

Fitch said the revision of the outlook reflects steady trends in passenger recovery at the airport, with plantations approaching 50% pre-pandemic levels by April 2021, coupled with a strong performance from the Northwest Seaport Alliance and the expectation that the Cruise operations resume in July after the cruise Industry lobbyists have passed legislation allowing their foreign-flagged ships to service Alaska from Seattle without stopping in Canada, which has suspended cruise operations due to a pandemic.

Moody’s also noted that unlike some other airports, Seattle’s management took immediate action after the West Coast economy was hampered by reduced business activity when governors asked residents to stay home.

The port postponed $ 40 million in capital spending for 2020 to save cash and cut operating costs in its 2021 budget to $ 46.4 million, lower than the 2020 budget of $ 469.8 million 167.7 vacant full-time positions were frozen or canceled. Freeze wage increases for unrepresented workers and achieve corresponding savings for represented workers; and limited travel and training to the minimum necessary to maintain certifications and reduce contracted services.

The port also applied for $ 147.1 million in CARES grants to pay airport costs and expects an additional $ 263.4 million from the federal government, according to an online investor presentation.

Since February 2021, the recovery of scheduled passengers at the airport has followed or exceeded national trends; the airport’s enplanements in April 2021 were 36% lower than in April 2019 and outperformed national trends by 5% according to the presentation.

In April 2020, amid the first shock of the pandemic, airport traffic fell 94%.

Airport traffic across the industry remains well below pre-pandemic levels, according to Fitch in an April 27 report.

“International gateways and leading business markets such as Boston, San Francisco, Chicago, New York and Washington DC are still very challenged due to ongoing restrictions on (international) travel,” said Henry Flynn, a director of Fitch, in a statement.

“International travel will still be challenging for a number of reasons,” said Moody’s Kopmar. “If we take an airport like Seattle, pre-COVID-19 international traffic was 11% or 12% of their passengers and now it is 7% of their passengers.”

With that in mind, Kopmar said the rebound has been more resilient and consistent than analysts expected. Domestic business travel, however, has not recovered as quickly as vacation travel.

“Our domestic numbers are still falling, but international traffic has continued to decline,” said Morrison. “There are restrictions on flying to different destinations. The distribution of vaccinations was uneven in other parts of the world. “

Trends affecting air travel are more important to the airport than container or cruise ship traffic, as the airport ranks 80% of the company’s net income even during the pandemic, Morrison said. The volumes in the port’s container business are mixed, but are recovering, she said.

The bulk of the $ 4.9 billion, approximately $ 4.3 billion, five-year capital improvement program will go to airport improvements, with $ 613 million earmarked for port improvements, according to an online presentation.

S&P analysts said in an April report that domestic demand for air travel, public transport and toll road transport has grown faster than expected, fueling the forecast of faster GDP growth.

Airport operators have been given $ 8 billion in federal aid, while airlines have received $ 82 billion since the pandemic began, S&P said.

Seattle-Tacoma Airport’s rating was revised to stable in April when S&P reviewed its toll, transit and airport ratings and shifted the loans of 126 issuers from negative.

The Port of Seattle compares favorably to other agencies with consolidated airport and port operations, such as the Massachusetts Port Authority, which is rated AA with a negative outlook, and Oakland, which is rated A-plus with a negative outlook; and with multiple airport systems like the Metropolitan Washington Airports Authority, Fitch analysts wrote.

According to the online roadshow presentation, Sea-Tac was the 8th and 10th busiest airport in the US in 2019 and 2020 based on the total number of scheduled domestic and international passengers.