Anatomy of a Deal: Large complicated JFK Terminal 6 deal soared

New York’s airport renovations have been the golden children of the municipal bond world. After then-Vice President Joe Biden compared LaGuardia Airport to a third-world country, both Queens-based airports were targeted for upgrades.

Demand was so strong for bonds for John F. Kennedy Airport’s new Terminal 6 when they priced last October, it was upsized to about $1.9 billion The New York Transportation Development Corp. was the conduit issuer. 

The complexity, size — it was one of the largest green financings ever for an airport facility — of the public-private partnership sale helped win the team The Bond Buyer’s Deal of the Year award in the green financing category. 

JFK Millenium Partners (JMP), the firm behind the Terminal 6 project, may offer more debt for the airport as soon as next quarter, according to an EMMA filing. 

JMP went to market last October feeling optimistic, according to Chief Financial Officer Mike Sibilia. 

The deal was a major public-private partnership, its team had also worked on the LaGuardia Airport renovation and was armed with a green designation from Kestrel. 

Marketing efforts had been extensive, and between tours of the site and one-on-one calls, the team had gauged significant interest, Sibilia said. 

When the day of pricing arrived, the deal was more than five times oversubscribed. It received $10.8 billion of bids from more than 120 different buyers, said Sewon Kim, head of transportation at Siebert Williams Shank. 

The deal was upsized by $450 million. 

The deal’s structure was also a “home run,” Sibilia said. 

The team priced $1.85 billion of Series 2024A current interest bonds. 

According to the deal’s nominating statement, “The 2024A CIBs were structured with a sinking fund term bond in 2054 with a 5.50% coupon, sinking fund term bond in 2054 with a 4.50% coupon and insured by AGM, a balloon maturity in 2054 with a 5.25% coupon and insured by AGM (Assured Guaranty), and a sinking fund term bond in 2060 with a 5.50% coupon.”

The team also priced $100 million of Series 2024B convertible capital appreciation bonds, also structured as a 2054 sinking fund term bond and insured by AGM, with a conversion date in December 2054. 

Sibilia said he was surprised at the market’s interest in the convertible capital appreciation bonds. 

According to the team’s Deal of the Year nominating statement, spreads were tightened by 2 to 8 basis points for the 2054 maturities, by 3 basis points for the 2060 bonds, and 25 basis points for the CCABs. 

Lorne Potash and Sam Nakhleh, of the Assured Guaranty team that insured $920 million of the bonds, said in a statement “it was an absolute honor and pleasure to work with the different parties involved in this project.”

“This was a complicated project. Whenever you are bringing a $1.95 billion issuance to market, there are a lot of people involved and a lot of expertise that is required,” the statement said.

Goldman Sachs and Siebert Williams Shank were the deal’s bookrunners and co- senior managers, with 11 co-managers. Six of the managers on the deal were minority/women owned business enterprises, Sibilia noted.

Backstrom McCarley and Berry and Frasca and Associates were co-municipal advisors. Squire Patton Boggs and HLF were bond counsels. 

The bonds were rated Baa3 by Moody’s Ratings and BBB-minus by S&P Global Ratings. The Assured-wrapped bonds were rated A1 by Moody’s, AA by S&P and AA-plus by KBRA. 

The green designation was a major factor in broadening the field of investors for the bonds, Kim said. 

Carbon emissions are “the elephant in the room” for airport construction, said Alethia Nancoo, partner at Squire Patton Boggs. 

“How can you be a green bond product and build an airport at the same time, when [air travel] is the biggest agent of greenhouse gas emission?” Nancoo asked. 

The JFK and LaGuardia airport renovations have set a “gold standard” for reducing the carbon footprint of an airport, Nancoo said. 

Terminal 6 has high efficiency building systems, around 4,000 solar panels, a system for stormwater capture and reuse, and 90% waste diversion built into the project, Sibilia said. The project is “on the way” to getting a LEED gold certification and a certification from the Sustainable Sites Initiative. 

This deal was Sibilia’s first time getting a green bond designation. It was an “extensive process,” he said, and the team from Goldman and Siebert was a big help.

The project was also one of the largest green financings ever for an airport facility, Kim said. 

“It just showed the desire of investors and their appetite to continue to invest in transportation infrastructure in particular and airport development here in the United States,” Nancoo said. 

Most of the JMP team also worked on the LaGuardia renovation, which earned The Bond Buyer’s Northeast Deal of the Year in 2016. Kim and Sibilia said the team’s experience helped logistically while working on JFK and its track record has helped attract and reassure investors and prospective airlines. 

“On the airline leasing side, I couldn’t say enough about the benefits we’ve been able to derive because of the fact that it’s literally in our backyard,” Sibilia said.

Sibilia interacts with investors at JPMorgan’s annual infrastructure seminars, he said. He used to represent LaGuardia and saw a lot of interest from investors when he started representing JFK.

“I could speak about the similarities between Terminal 6 and LaGuardia to the investors,” Sibilia said. “The same individual was the one speaking to them from both projects. I think that type of interaction was very helpful on the investor side.”

Terminal 6’s construction has come a long way since the deal, Sibilia said. The terminal’s electricity has been turned on, most mechanical systems — like elevators — are installed and being tested and some of Terminal 7’s operations are occurring on Terminal 6, Sibilia said. JMP has announced eight more airline leases since the deal priced.

“It’s marvelous how much we’ve been able to accomplish in this past year,” Sibilia said. “Putting the initial financing behind us, we could dedicate more time and effort into the leasing side and the construction side.”

Terminal 6 is planned to cost $5 billion and is scheduled to be completed in 2028. The terminal will be roughly 1.2 million square feet with 10 aircraft gates, multiple lounges, concessions, and connectivity to Terminal 5. 

The upcoming bond issuance would take out the rest of JMP’s outstanding bank debt, originally issued in 2022, according to the disclosure on EMMA. Goldman and Siebert Williams Shank would once again lead the underwriting team. RBC is the sole bondholder of the 2022 bonds being refunded. 

Kim said the team is having a conversation with Kestrel about earning green bond designation for at least part of the upcoming deal. 

Sibilia thinks investors will be enthusiastic about the new bonds. He again spoke with investors at JPMorgan’s infrastructure conference in April. “They were asking me the same question you’re asking,” Sibilia said: “When are you going to do another financing?”