LOS ANGELES - The Los Angeles Department of Airports is looking for a financial adviser to help it decide whether or not to refinance some or even all of its bonds.
Adding a wrinkle to the plans is the department's battle with airlines over landing fees.
Completed applications from financial advisory firms are due tomorrow "relative to proposed refunding, refinancing, and defeasance opportunities available" on existing airport revenue debt, the department said in a recent request for proposals.
The Airports Department said it has issued eight separate 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, 1993.
"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 proposal request says.
New bonds would be sold competitively, the proposal request says.
Advisory firms may be interviewed for the post at the end of next week, and a selection panel tentatively plans to make a recommendation on Oct. 26. The department's Board of Airport Commissioners would then have final authority to award the contract.
One of the financial adviser's tasks could include allaying market concerns about the highly publicized battle between the Airports Department and airline companies.
Last month, Standard & Poor's Corp. placed the airport revenue bonds on CreditWatch with negative implications, citing the refusal of various airlines to pay a landing fee increase.
In July, the department increased rates based on a new cost allocation formula. The move roughly tripled landing fees, but scores of carriers have refused to honor the increase.
At one point the airport system said it would ground the protesting carriers as of Oct. 4 unless they paid the fees. Late last month, however, the airport decided against revoking the operating rights until a judge can rule on a legal dispute over the increase.
The airlines have 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.
A court hearing over the dispute is scheduled for Oct. 25.
Standard & Poor's is unlikely to alter its CreditWatch stance "until something happens" in the dispute, Peter Bianchini, a director of the firm, said yesterday. "We're looking for resolution of this landing fee issue."
Uncertainty stemming from such legal battles can occasionally force an issuer to pay slightly higher interest rates in a bond sale.
In this instance, however, it is premature to predict whether the dispute will affect a potential refinancing.
It is possible, for example, that the airport and airline carriers will agree to terms before a bond sale.
In addition, some market participants continue to view the Los Angeles airport system as a solid credit. Reflecting that view, Standard & Poor's grades the department's bonds AA-minus, the agency's highest airport rating.
Moody's Investors Service rates the bonds Aa.