The city of Denver must come up with $41.6 million more to fund the three-month delay of the opening of Denver International Airport, city officials said yesterday.
Capitalized interest costs on the new bonds and project additions requested by airlines have pushed the cost up $177 million over the $2.7 billion budgeted for the project.
A delay until March 9 of the opening means that both the city and the airlines will have to pay their share in making bond payments because revenue won't be collected from Denver International.
For it's part, the city of Denver will take reserves from the airport system and profits from Stapleton International to pay $12 million in interest and operating costs associated with the new airport. The airlines will repay their portion - approximately 70%, or $29.74 million per month, through their lease payments when they move into the new airport.
In related news, Standard & Poor's Corp. credit committee members were in intense discussions yesterday about the project and postponed a planned announcement on the three-month delay on the project until today after a vote of the airport rating committee, officials said.
Although neither Fitch Investor Service or Moody's Investor Service changed their ratings, BBB and Baa1 conditional, respectively, Standard & Poor's has bun the most critical rating agency on the project and for more than a year had a BBB-minus rating on the debt. Standard & Poor's now rates the debt BBB.
"We had a rating committee today. It had some questions and we've been in touch with the city, which is putting together replies to the questions," said Standard & Poor's analyst Eenie Perez.
"The general areas were actual project construction costs and the fact that we want assurances that the March 9 date is final. We'd like to talk to the airlines as well to see if they're willing to pay interest costs," he added.
The bench-mark Denver Airport bond traded yesterday at 6.40% yield, virtually unchanged over the past few weeks. In June, they yielded 6.68%, which suggests a strengthening in trading of the bonds.
"My sense is they [Standard & Poor's] expect to make a comment. I don't think too much should be read into that," said Gennifer Sussman, the airport's finance director.
Sussman said she did not see any reason why Standard & Poor's would downgrade the bonds or place them on CreditWatch and said the agency has not indicated it would.
"People are pleased to have a firm date now. We would all have liked to have it earlier than even the March 9 date," Sussman said.
Analysts spent much of Tuesday figuring out how much the delay would cost and who would pay it.
Total monthly interest costs on Denver International are $20.53 million. That is offset by $3.6 million in passenger facility charges revenues and $1.84 in interest income, leaving a net monthly debt service of $15.1 million.
The ailines have agreed to pay 70%, or $10.67 million of that monthly interest bill.
The city must also fund $44 million in extras airlines wanted installed. The actual figure for airline improvements was $177 million, but budgeters used reserve funds to Pay for some of that.
The city plans to use $37 million from unused proceeds from a Stapleton capital improvements fund and $7 million from excess aviation fuel tax revenues that have been set aside. The money will then be repaid back by airlines and passengers through lease agreements.
The city signed an agreement with airlines limiting the per passenger emplanement cost under $20. City officials say the present expenditures leave them at $14.48 per emplaned passenger, without netting out inflation, which the contracts allow for. Figuring in inflation under the contract requirements brings the number down to the $12 range.