"O'Hare Offering in Sight - First Runway Bonds Could Sell Next Year"

Tuesday, November 5, 2002

O'Hare Offering in Sight - First Runway Bonds Could Sell Next Year
Bond Buyer  - The American Banker


CHICAGO , Chicago plans to sell, as early as next year, the first
long-term bonds tied to the $6.6 billion overhaul of O'Hare
International Airport's runways, a city Aviation Department official
said yesterday.

The deal now in the works could price sometime in the first quarter of
2003 and would carry a general airport revenue bond security, according
to John Harris, first deputy commissioner in the department.

In the city's most detailed comments yet on debt plans related to the
project, Harris said the inaugural deal's size has not yet been set,
though it would likely top $100 million. "We're still working on that
estimate,"he said. Harris spoke following a panel discussion on
Chicago's airport capacity at the Illinois Public Finance Conference
here sponsored by the Information Management Network.

The deal may also be accompanied by a refunding component. Proceeds
would pay for initial land acquisition, noise-reduction expenses, and
environmental studies related to the plan to reconfigure the airport's
seven existing runways and to add a new one.

Despite the airline industry's financial struggles, the city has
received a commitment from airlines at O'Hare of $100 million to pay for
the project's initial planning costs. The city is currently using its
commercial paper program for its airports to raise funds as needed for
those costs. That paper will eventually be converted to long-term debt
as the project progresses.

The deal itself is still in the early stages. The city has not yet
selected a financial team. Harris said Ricondo & Associates, an aviation
consulting firm, is assisting the city in drawing up a financing scheme.

Chicago laid the groundwork for the deal earlier this year when it
opened a third lien on its O'Hare GARBs. That allowed the city to push
maturities out past 2018 -- the date that first- and second-lien debt is
limited to because of operating agreements in place with the airlines.
The third lien also allows the city to tap additional revenue streams as
repayment sources.

Harris outlined a general timetable for the project. The city has
already submitted initial environmental studies to the Federal Aviation
Administration and has asked for federal approval to use passenger
facility charges to finance qualified portions of the project. Before
the end of the year the city will submit a layout plan to the FAA. City
officials hope to wrap up the review process by mid-2004 and break
ground soon after.

That timetable does not take into account the potential impact of
pending litigation. The city is seeking to lift a court-ordered
injunction that bans the city from acquiring property in two suburbs
before the state gives the project at least preliminary state approval.

The project has its opponents, especially in the suburbs surrounding the
airport that anticipate more noise and congestion. But business and
airline support remain strong. The airport's top carriers, including
American Airlines and United Airlines, support the project despite their
financial woes because of the costs associated with flight delays at the
airport that impact the national traffic grid.

That same support is still lacking for Chicago's $3.5 billion plan to
renovate and expand the airport's terminals. The city put the project in
a holding pattern at the airlines' request as they try to regain their
fiscal feet. "Runways are the priority," Harris said.

The runway plan -- a compromise agreed to by Mayor Richard Daley and
Illinois Gov. George Ryan -- is the subject of a bill now pending before
Congress that locks the project into federal law and prevents future
city or state leaders from altering it. The House has approved one
version, but opposition from Republican Sen. Peter Fitzgerald has
stalled the bill in the Senate. Harris said the city anticipates a vote
following the election. The compromise plan also promotes a third
airport in the south suburbs, a project once opposed by Daley, and
leaves open the city's small downtown airport, Meigs Field, until 2026.


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