LOS ANGELES -- The Los Angeles Airport Commission on Tuesday selected Public Resources Advisory Group as its financial adviser to assist in exploring a potential refinancing of some or all of its bonds.
The commission board this month received nine written responses to a request for proposals. A panel of airport officials conducted interviews on Oct. 15 and ranked Public Resources, which was teamed with Muriel Siebert & Co., first in the process.
A Public Financial Management team, and a Prager, McCarty & Sealy team ranked second and third, respectively.
Public Resources "exhibited a creative and systematic approach to achieving the narrow objective outlined in the RFP, at a competitive cost, and also presented financial issues and options of a broader nature for the department to consider," the panel said in a report. The firm's recommendations included "strategies to enhance the department's credit rating and to increase the flexibility of the bond resolution."
The contract covers a two-year period, with extension possible at the board's discretion.
Jens Rivera, a senior management analyst for airport administration, said Lazard Freres & Co. will continue to serve as financial adviser on a separate proposed bond issue to help build a new airport terminal in Ontario, Calif.
The commissioners chose to let other financial advisers vie for work on the refunding because "they just like to open it up" to competition, Rivera said, adding that the department periodically reviews other financing participants.
Lazard Freres tied for fourth in the latest panel rankings.
The Los Angeles Department of Airports has sold eight revenue bond issues since 1965, totaling $840.2 million, to finance capital improvements. About $303 million of that debt remained outstanding as of June 30.
"With current bond market yields at historical lows, the department desires to investigate the opportunities available to refinance some or all" of these bonds to lower overall debt service payments, the request for proposal said.
One of Public Resources' tasks could include addressing any market concerns about a highly publicized battle between the airports department and airline companies.
Market participants generally view the Los Angeles airport system as a solid credit. For example, Standard & Poor's Corp. rates the department's bonds AA-minus, the rating agency's highest airport rating.
Last month, however, Standard & Poor's placed the airport revenue bonds on Credit Watch with negative implications, citing the refusal of various airlines to pay a landing fee increase.
Controversy arose recently when the department increased landing fees based on a new cost allocation formula. The move roughly tripled landing fees, but many carriers have refused to honor the increase and continue to pay at the old rate.
In response, the airlines also filed a federal class action lawsuit, charging that the fee increase ignores federal laws and international agreements prohibiting the airport from imposing fees above those needed to operate the facility.
On Monday, airport officials won a victory in the dispute when a federal judge in Los Angeles refused to guarantee the airlines a right to land at the airport if they fail to pay the fees.
U.S. District Court Judge A. Wallace Tashima said the airlines had not proven they would suffer "irreparable harm," adding that they could pay the higher fees and then seek to contest the fairness in court.
Airport commissioners are expected to decide at a Nov. 8 meeting whether to carry out the threat to exclude airlines from landing if they fail to pay the higher fees. Tashima is expected to rule by early December on the overall landing fee dispute.
