DENVER -- On Wall Stree, good news often has a half-life measured in minutes.
Two weeks after a final agreement committing United Airlines to use the new Denver International Airport, other concerns have dampened the euphoria in the secondary market and talk of an upgrade of the project's near-junk rating.
Today's investors may still be pleased, but they are again refocused on old issues: the cost and progress of the $3.1 billion airport and the year-old bankruptcy of Continental Airlines.
"A project this big never revolves on a single issue," said a bond fund manager who holds some of the airport revenue bonds. "When you hear about United, you smile and mark it off your list of concerns and go on to the next thing."
In 1992, investors in the airport bonds will have much to watch, wonder, or worry about. Denver officials must sell the remaining $1 billion in debt. Moreover, the city must spend nearly twice that amount if the project is to open on schedule in October 1993.
"Over all, we're in great shape," said Ginger Evans, associate director of aviation, who is overseeing the construction. So far, she said, the project is on schedule and budget, with some $1.2 billion under contract.
With much of the preliminary work completed, the new airport construction site -- an area twice the size of Manhattan -- early next year will become a small city with an estimated 7,000 people working around the clock.
Most airport projects rely only on a small group of contractors, but Denver has some 70 general contractors and hundreds of subcontractors in what critics say is at risk of becoming an unmanageable project plagued by cost overruns.
Denver Auditor Robert Crider has been monitoring amendments to the original plan, known as change orders. To date, the biggest percentage of cost adjustments have been on small contracts.
"As of yet, I haven't seen those as a big thing," the auditor said. "But they have to watch it very closely." Project officials said they already have taken a hard line against approving change orders unless they agreed to alter the project plan after the contract was signed.
Richard Young, a Denver-based lawyer and a frequent critic of the project, said the Denver would be unique if it were able to complete the project within the 10% contingency it has budgeted. "With large projects, the cost overruns have always been higher than that," he said.
Because change orders often trail construction by six months, Mr. Young said the most significant adjustments may not come about until next spring. Further, he believes many contracts were underbid intentionally.
In fact, he said the change orders -- including a $20 million adjustment under discussion -- already prove the project is off budget. City officials disagreed.
"In my view, it doesn't become a cost overrun unless we go over $2.7 billion [construction budget] because I tend to look at the big picture," said Patricia Beer, Denver manager of revenue. "We could have this little piece where it went over and this little piece where it went under. As long as it all evens out in the end, I don't call it a cost overrun."
Ms. Evans said the project has up to three months of flexibility in its schedule and $325 million of contingencies built into the construction budget.
Besides, the city has a 200-member staff monitoring contracts to keep progress on schedule, she said, producing an organizational chart of project management that resembles a Chinese checkerboard.
"A little bit of money in administration buys you a lot in construction dollars," Ms. Evans said.
As construction progresses, project officials expect to return to the bond market in February with a fixed-rate issue of $200 million to $300 million that is not subject to the alternative minimum tax. The new Lehman Brothers-led finance team, which met for the first time last week, is studying the possibility of including up to $70 million of aviation fuel tax-backed bonds in the sale.
The city already has sold $2.1 billion of debt for the project, which is rated BBB by Fitch Investors Service, conditional Baal by Moody's Investors Service, and BBB-minus by Standard & Poor's Corp. Standard & Poor's has recently put the rating on CreditWatch with positive implications.
While the structure of the next deal is unresolved, Ms. Beer said one thing is for certain: Denver will not wait for Continental Airlines to decide if it will accept or reject its lease agreement to use Concourse A at the new airport.
"It's not going to happen between now and the text bond sale, we've always said that," she said. "We expect that Continental will be here. At what level is the question."
Some observers believe that unless the airline finds a strong merger partner, Continental is likely to bring in fewer passengers than it now does at Stapleton International Airport.
Others say that United Airlines probably realized that when it agreed Dec. 9 to a 30-year lease committing it to 42 jet and 24 commuter gates at Concourse B.
"United knows that they can come in here and they are going to own this place," said Mike Boyd, president of Golden, Colo.-based Aviation Systems Research Corp. and a critic of the new airport. "They will have a monopoly."
Others speculate that United reached the agreement after being pressured by the U.S. Department of Transportation to commit to an airport that the federal government strongly supports. In exchange, the government offered choice international routes after the pact was announced.
Still, the United agreement has yet to be signed by the city, Airline officials have signed the pact, and it is expected to win unanimous approval at a city council meeting tonight. After council approval, Mayor Webb and Mr. Crider are expected to sign the document.
"I'm not looking for any red herrings. I want to sign it," said Mr. Crider, who caused a stir two months ago when he questioned the economics of the project on the day a $600 million offering was priced. "Anything that guarantees the money so those bonds get paid is something I want to sign."
