"Twin Cities Airport Expected to Cut $370M Bond Sale to $120M"

Monday, March 17, 2003

Twin Cities Airport Expected to Cut $370M Bond Sale to $120M
Bond Buyer - The American Banker


CHICAGO , In survival mode, the Metropolitan Airports Commission is
expected soon to vote to temporarily delay some portions of its $3
billion capital program now under way at the Minneapolis-St. Paul
International Airport -- a move that would cut a planned $370 million
bond sale down to $120 million.

"Based on the state of the economy and the state of the industry, the
capital improvement program is being reduced," said Steve Busch, finance
director for the commission, which owns and manages the airport along
with six smaller ones in the region. "We have to make sure that MAC and
Northwest Airlines survive."

The deal was originally sized last year at $370 million with a
fixed-rate portion and a variable-rate piece. Lehman Brothers will
senior-manage any fixed-rate series and RBC Dain Rauscher will manage
the variable-rate piece. The revised deal will likely price all bonds in
a fixed-rate mode. First Albany Inc. is the commission's financial
adviser.

The commission will use passenger facility charges to repay the debt,
but board members have not yet voted on whether to secure the deal
solely with PFCs or to tack on a general airport revenue bond pledge.
The commission's senior-lien GARBs carry a sturdy rating in the low
double-A category.

The PFC transaction was planned as part of a lease agreement forged
several years ago between the commission and the airport's carriers to
reduce the reliance on a GARB security, thereby stretching out fee
increases paid by the airlines over a longer period of time.

The agency early last year put on hold about $750 million worth of
projects amid a decline in air traffic following the terrorist attacks
in the fall of 2001 and Northwest Airlines' struggles to weather the
economic downturn. Northwest, based in the Twin Cities suburb of Eagan,
accounts for about 75% of the traffic at the Minneapolis-St. Paul
airport.

The commission had planned to complete about $265 million of projects
this year, but now it will likely work on just $87 million. The delay
will push back by one year the completion date for a new $500 million
runway and other related projects totaling another $250 million.

The number of passengers at the airport increased by 1.2% from its
post-terrorist-attack drop. However, the airport's fortunes run in
tandem with Northwest's, and the airline is struggling, having lost $1.2
billion over the last two years. Industry experts have speculated that
if American Airlines follows United Airlines into bankruptcy, Northwest
and other major carriers could also follow. The airline has trimmed
about $1.2 billion from its bottom line over the last two years through
cuts and layoffs.

The commission has implemented a series of spending cuts over the last
two years and scaled back on projects -- moves that kept Northwest's
fees for operating at the airport this year level with those of last
year. Northwest continues to pressure the agency to do more.

Freshman Minnesota Gov. Tim Pawlenty, who appoints 13 of the
commission's 15 board members, is supportive of Northwest's requests. A
recent report commissioned by the state Legislature suggested that the
agency face more stringent state oversight -- including Senate
confirmation of members -- but that it should remain autonomous from
state government.

The $3 billion expansion project, which was designed to handle the
airport's traffic needs through 2010, began in 1998.


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