DALLAS -- Lehman Brothers will head the 13-member finance team that will underwrite the remaining $1 billion in debt needed to build the Denver International Airport.

Mayor Wellington Webb last week reappointed Lehman Brothers co-senior manager on the financing, along with the first-time team members Piper, Jaffray & Hopwood Inc., a Minneapolis-based regional with Colorado ties, and Artemis Capital Group Inc., a woman-owned firm in New York City.

The mayor reappointed Lehman, which handled a $600 million offering in October, despite reports that project bonds had temporarily eroded due to lack of secondary market support.

Patricia Beer, Denver's manager of revenue, said Lehman Brothers was questioned about its support of the bonds after competitors and others raised the issue. "We heard a lot of that," she said. "I discussed it will Lehman and they disagreed with me and said it wasn't a problem."

Stanley Ciemniecki, Lehman's executive vice president and manager of national underwriting, said yesterday his firm will continue to support the bonds. Saying that trumors to the contrary are wrong, he added, "There is no problem."

The 10 co-managers are: Goldman, Sachs & Co,; Merrill Lynch & Co.; Prudential Securities; Pryor, McClendon, Counts & Co.; Apex Securities of Houston; Dain Bosworth; Hanifen, Imhoff Inc.; Weldon Sullivan Carmichael & Co. of Denver; and M.R. Beal & co. and Bear, Stearns & co., both first-time members of the financing team.

The selection process for airport was the second for Mayor Webb since taking office in July. He named an 11-member panel to study 37 proposals and recommend a financing team.

Lehman Brothers will be book-runner on an anticipated $200 million to $300 million fixed-rate offering tentatively expected in February. However, the lead position will be rotated as Denver prepares to sell the last one-third of $3.1 billion in debt financing.

The financing team stands to make millions of dollars in underwriting profits from the coming sales of the closely watched project.

In the last sale, Denver paid a gross spread of $9.83, with $7.58 of that in average for airport revenue the average for airport revenue bond sales in 1991 is a gross spread of $10.21, with a takedown of $7.12, according to Securities Data Co./Bond Buyer.

Already, the city has sold $2.1 billion in bonds to build the first totally new airport since the Dallas-Fort Worth International Airpor was completed in 1974.

Ms. Beer said the sale of the next $1 billion is likely to be more difficult than selling the first issues beginning in 1989. "I think it's going to be tougher," she conceded. "We're coming up on a lot of decisions about United and Continental."

She said the new financing team -- which includes four first-time firms -- will have to work harder to communicate the city's message to investors because of pending decisions by the top two carriers over their commitment to use the new facility when Stapleton International Airport closes in late 1993.

In fact, Continental Airlines said it expects to file its bankruptcy reorganization plan as early as this week. That plan will indicate the Houston-based carrier's commitment to its long-term lease to use the new airport.

At the same time, city officials said they will not likely finalize a use and lease agreement with United Airlines until early next year -- possibly before the next scheduled bond sale.

Wall Street analysts have cited the uncertainty in the coming months as the chief reason for the project's ratings. Standard & Poor's Corp., which rates the project BBB-minus, has placed its rating on an unusual developing status and said the next six months will be critical.

Moody's Investors Service rates the bonds Conditional Baal, while Fitch Investors Service assigned the bonds BBB.

Analysts and investors are not the only ones who are closely watching the project. Ms. Beer said the city continues to talk with bond insurers about guarantees that are critical in making the bonds attractive to retail investors.

"We're going to continue to talk to the insurance people again," she said. "There is going to come a point and time when the credit improves and we're going to get it." Unsurers "have indicated a willingness to continue to look."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.