Anatomy of a deal: a muni market ‘IPO’ for Columbus airport

John Glenn Columbus International Airport has a long history of serving Ohio’s capital. But its revenue bond credit hadn’t been seen in the municipal primary for some 18 years before January’s $1.2 billion revenue bond deal.

That made the deal — issued to fund a replacement for the airport’s 1958 terminal — akin to a municipal market IPO, according a member of the team behind the transaction, for which the Columbus Regional Airport Authority claimed the Midwest region win in The Bond Buyer’s Deal of the Year contest.

Coming to market at a tumultuous time, with events in Washington, D.C., injecting uncertainty, the bond issue forced the deal team to “start from scratch” as they shaped the inaugural financing for the project to construct a new, modern terminal to replace today’s aging facility.

The authority had never gone to market with a deal of this scale, and hadn’t been in capital markets for a new money airport revenue bond deal since 2007. The existing indenture was around 30 years old and needed to be completely updated and restated.

There was a private placement refunding in 2015. And the authority sold a passenger facility charge-backed taxable bond for its consolidated rental car facility in 2019, but that was under a different master trust indenture, with different ratings, for a different investor base, said Fabio Spino, chief financial officer of the authority.

“We had to re-establish ourselves with the rating agencies, introduce ourselves,” he said. “We had to develop a lot of documentation from scratch, our official statement, as well as re-establish our master trust indenture.”

The 2025 bonds were rated A2 with a stable outlook by Moody’s Ratings and A with a stable outlook by S&P Global Ratings.

RBC Capital Markets priced the $1.201 billion of airport revenue bonds on Jan. 28.

The first tranche, $1.02 billion of Series A bonds, tax-exempt but subject to the alternative minimum tax, saw yields range from 3.63% with a 5% coupon in a 2030 maturity to 4.64% with a 5.5% coupon in 2055. 

The second tranche, $187.95 million of non-AMT Series B bonds, yielded from 3.00% with a 5% coupon in 2030 to 4.33% with a 5.25% coupon in 2055.

One of the most important pieces of the behind-the-scenes work was the airline use and lease agreement, which was expiring at the end of 2024. The authority simultaneously negotiated two agreements within 10 months, bringing the airlines on board for one extension of the existing agreement and one residual agreement for a term of five years with a five-year extension. 

“That really was the cornerstone of this financing,” Spino said. “It allowed the rating agencies to understand how serious we were, the commitment from our airline partners, and it really positioned us for success. A lot of investors, I think, viewed that long term commitment as a credit positive for us.”

The deal was 3.4x oversubscribed, and the deal team received $4.11 billion of total retail and institutional orders from 88 unique investors, according to the nomination.

The strong demand allowed the deal team to upsize the transaction, funding an additional $175 million in projects and reducing the size of future bond financings for the project.

The deal was very straightforward in some ways — AMT and non-AMT series with a standard 10-year call feature, as is common in airport deals. 

But at the time of pricing, right after the inauguration, there was uncertainty driven by the Trump administration’s plans for a tax and spending bill, and what it would do to tax-exempt bonds.

Throughout January, the deal team was concerned that “AMT would go away,” Tom Yang, managing director and co-head of municipal transportation finance at RBC Capital Markets, the lead manager on the deal, said in an interview.

There was also uncertainty around inflation, interest rates and other administration policies. For example, on the morning of pricing, there was some noise coming from the Trump administration about the temporary suspension of federal grants that included Federal Aviation Administration dollars.

“We strategically decided to target pricing on Tuesday (Jan. 28), a FOMC date, because of an anticipated light market calendar and general market consensus that a rate action was not likely,” Yang said by email. “This would also give us the flexibility to price on Wednesday or Thursday if the market was not favorable on the 28th.”

Chris Franzmann, partner at bond counsel Squire Patton Boggs, said in the end, the timing of the pricing “worked out great.”

He added, “We actually upsized the deal a little bit at the time because of some concerns that the team had about what was going on in Congress relative to AMT.”

Franzmann noted the offering document was essentially done from scratch, as the authority hadn’t prepared one in over 15 years.

“We wanted to make sure that the indenture was as modern as possible, so we surveyed indentures from other airports,” he said. “That took some time, but the working group all contributed to that effort. It was a team effort.”

The AMT series saw orders from 74 investors, with 75% of the orders coming from bond funds and 21% from relative value/trading accounts, an emerging group of investors for AMT bonds.

John Glenn is a medium hub airport with growing passenger traffic. In 2024 enplanements hit 4.47 million, 3.7% above 2019 levels and a 31.9% increase over ten years.

But the airport’s existing terminal dates back to 1958, and its three concourses are separated by security checkpoints, meaning that travelers who arrive at one concourse and need to transfer to another have to go back through security to get to their gate.

The new terminal will modernize the airport and complement the economic growth of the Columbus area, said Spino, and this transaction set the pace for the project. 

The closing of the deal marked the culmination of a years-long planning process that had been repeatedly interrupted by economic downturns and the pandemic. And Spino said the authority couldn’t have done it without the support of its board, president and staff.

“Our collaboration with the authority began in 2017, shaping the program’s feasibility and financial strategy,” Kevin McPeek, senior managing consultant at Public Financial Management, the municipal advisor on the deal, said by email. “Despite pauses — including during the pandemic — the board’s final approval marked a defining milestone in a long and thoughtful journey.”

McPeek said the “substantial” line of credit from BofA provided flexibility, allowing the airport to defer long-term debt issuance until early 2025, “when cost visibility improved and market conditions appeared favorable.”

But to get to closing, the team had to overcome other challenges besides the uncertainty coming from Washington.

Columbus Regional Airport Authority

“The time frame was really my biggest challenge,” said Spino, who joined the authority in June 2023. “The airport was planning this for years. Coming in in mid-June, rolling into airline negotiations by November, really keeping that momentum going — it was a pretty quick pace that we had to maintain… There was very little room for error.”

To determine the timing of pricing, the deal team looked at the cash needs for the project and worked backwards to calculate when the issuance would need to happen, settling on the first quarter of 2025. 

“We did have a line of credit in place, which was kind of carrying the burden of the construction, but the timing worked out impeccably,” Spino said. “We navigated all of the changes in government interest rate uncertainties, and we… upsold those bonds. I still get compliments today from underwriters on the execution of that deal, the interest rate structure we received. It was just well planned, well executed, and we had a really solid finish.”

The airport sector has seen plenty of high-profile, billion-dollar bond issuances by large hub airports in recent years, Yang said by email. But now many medium and small hub airports are “beginning to undertake sizable capital programs that are much higher than their programs from 20 years ago,” he said.

Columbus is in the vanguard, and Yang compared the deal to an initial public offering: “This was a ‘big deal’ for the authority in every sense,” he said.  

“The finance team spent a lot of time in developing the rating strategy and credit framework,” Yang said by email. “That included a windy site tour in the December chill for the rating agencies, on top of the rental car facility overseeing the site for the new terminal.”

The authority carefully assembled a team that cooperated well: “We’ve all worked very closely together. No egos, very diligent. We had regular calls for a number of months,” Yang said in an interview.

“This deal highlights the value of a unified team approach,” McPeek said by email. “The authority’s proactive stance fostered transparency and alignment between project and finance teams, which helped facilitate clear communication with investors and rating agencies.”

The authority plans to return to market with a second financing for the project in 2027, Spino said.

“Airports are your gateway to the world,” he said. “It’s the first impression people have with your city, and oftentimes it’s the last impression. And with this new terminal, we’re going to make a first-class impression.”

Jessica Lerner contributed reporting.