Tampa International Airport (TPA) is set to issue approximately $484 million in alternate minimum tax (AMT) eligible senior bonds, anticipated to be priced on Thursday within the broader context of a strong recent credit rating upgrade. This financial maneuver comes just days after Fitch Ratings upgraded the airport’s subordinate debt from A-plus to AA-minus, underscoring the airport’s solid financial standing and operational growth trajectory. The bonds, authorized by the Hillsborough County Aviation Authority, have received favorable ratings: Aa3 from Moody’s, AA-minus from Fitch, and AA from Kroll Bond Rating Agency, reflecting a stable outlook across the board.
The Series 2024B bonds will be structured with serial maturities ranging from 2017 to 2044, along with term maturities extending into 2049 and 2054. A callable provision at par will also be part of the bond offering, although the specifics regarding the callable date will be determined during pricing. Ken Cushine, principal at Frasca & Associates, emphasized the robust interest being generated for these bonds, particularly stemming from recent rating upgrades that resonate positively with potential investors.
The proceeds from this bond issue are earmarked for significant infrastructure developments, most notably the construction of Airside D. This innovative project aims to enhance TPA’s capacity with the addition of 16 new domestic and international swing gates, a response to the airport’s surging passenger traffic. This development is part of a broader $1.5 billion expansion effort, with around $896 million of that financed through new debt. Furthermore, the installation of an automatic people mover to connect Airside D to the main terminal complex reflects a commitment to improving operational efficiency and passenger convenience.
Tampa International Airport’s expansion project can be contextualized within a larger, three-phase capital improvement plan. The initial phase was completed in 2018, and the second is expected to wrap up by next year. With construction scheduled to commence in September 2024 and completion projected by September 2028, this timeline indicates a methodical approach to infrastructure growth aligned with increasing travel demands.
In terms of competitive positioning, the airport’s recent performance stands out amidst the increasing demand for air travel in the U.S. In July, a record 84 million passengers moved through Transportation Security Administration (TSA) checkpoints nationwide. Specifically, TPA reported having 11.56 million enplaned passengers for fiscal year 2023, a figure surpassing the pre-pandemic peak achieved in 2019. With projections indicating a compounded annual growth rate of 3.2% for passenger activity through fiscal 2030, TPA appears well-positioned to capture a larger share of the travel market, particularly benefiting from its proximity to popular destinations like St. Petersburg’s beaches.
The recent upgrade in credit ratings has played a critical role in boosting investor confidence in TPA’s bonds. Moody’s cited the airport’s dominant market position within the Tampa Bay area, alongside steady economic and population growth as key factors supporting its Aa3 rating. In addition, the airport’s financial strategy, which includes the ability to levy an ad valorem tax for up to $200 million annually, although unchanged since 1973, remains a noteworthy piece of the authority’s fiscal stability puzzle.
Recent reports have indicated that the airport’s total adjusted debt to net revenue ratio has significantly decreased from 9.05 times in fiscal 2019 to 5.24 times in fiscal 2023, signaling effective debt management practices. The authority’s strong liquidity, standing at an impressive 756 days as of September 30, 2023, further solidifies TPA’s robust financial profile.
Despite the favorable outlook and strong performance metrics, TPA faces potential challenges. High tourism dependence could lead to fluctuations in passenger volume, particularly during extreme weather events like hurricanes. The recent encounter with Hurricane Debby illuminated this vulnerability, although operational continuity was largely maintained. Additionally, the airport’s massive $3.5 billion capital improvement program will necessitate careful financial planning, with around $1.7 billion in new debt anticipated during the execution of these projects.
The forecasted population growth surrounding the airport also presents both opportunities and risks. While nearly 30% of Florida’s expected population increase will occur in TPA’s primary catchment area, sustaining adequate infrastructure and services to accommodate this growth will be crucial to maintain its competitive advantage.
Tampa International Airport’s upcoming bond offering, along with its ambitious expansion projects, marks a significant milestone in positioning the airport for future success in a rapidly evolving travel landscape. With strong investor confidence buoyed by recent ratings upgrades, efficient financial strategies, and a commitment to enhancing operational capabilities, TPA is poised to navigate the challenges ahead while capitalizing on the continued growth of air travel demand.
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