ATLANTA -- After three years of effort, the Spaceport Florida Authority has arranged its first financing, a $25 million taxable bank loan to build a museum commemorating manned flights to the moon.
The authority's administrator, James D. Leary, said Friday that he expects the borrowing from SouthTrust Bank of Alabama to close tomorrow, following unanimous approval by Spaceport Florida's board of directors on June 17.
"We are very pleased this is all at last coming together and think it's a great thing for Florida," Leary said.
"This shows the authority can do innovative things in funding projects," said Thomas Holley, the authority's financial adviser and president of Government Financial Advisors Inc. "It also shows we have the ability to persevere, which bodes well for financings to come."
Loan proceeds will fund the $34.1 million Apollo/Saturn V Tour Facility to be built at the National Aeronautics and Space Administration's visitors center in the John F. Kennedy Space Center. When completed in 1996, the 90,000-square-foot museum will house one of the three remaining Saturn V rockets used to carry men to the moon.
Leary said that the authority decided in April to pursue a bank loan rather than a debt security financing after presenting four options to NASA, one of which was a taxable bond deal backed by a bank letter of credit. He said NASA indicated that it preferred the loan option because it afforded the agency "greater flexibility" in building and managing the museum.
SouthTrust was chosen, Leary said, because of the favorable loan rate it proposed and because the authority was familiar with the bank.
Authority officials decided not to pursue a tax-exempt financing for the project because such a borrowing could have raised problems with the management contract under which the visitors center is operated.
But Leary said the authority will continue a push, first initiated in 1991, to persuade Congress to establish a special category of tax-exempt bonds for commercial spaceflight facilities modeled on rules for airport financing.
The authority has argued that such use of tax-free debt would help spur the development in the United States of an industry that so far has been hobbled by government-subsidized foreign competition and uncertain worldwide demand.
Established by the Florida legislature in 1989, the Spaceport Florida Authority is the first local government unit in the country with explicit power to issue revenue bonds for space-related purposes.
But until now, it has been frustrated in its efforts to provide funding for such ventures.
In 1990, for example, the authority's directors authorized the sale of up to $25 million of debt to fund Florida-based launch facilities for General Dynamics Corp. However, after General Dynamics suffered a series of financial setbacks, the idea fell through.
The NASA museum financing has also presented its share of hurdles, the authority's officials say.
In 1991 Spaceport Florida Authority first began discussing the financing with NASA officials, who were eager to explore ways to avoid the delay of funding the museum on a "pay as you go basis." By May 1992, a memorandum of agreement was worked out between the authority and NASA, stipulating that each would make its "best efforts to negotiate appropriate agreements."
This was followed by selection of an underwriting team, headed by Lehman Brothers, for the financing in September 1992. NASA did not sign a use permit for the museum until early 1993. In addition, more time was needed to work out final details of the borrowing after the authority decided to pursue a bank loan rather than a debt security.
The loan with SouthTrust comes due in eight years, but the borrower has the option of extending its maturity five years if debt service coverage is maintained at 1.5 times, according to Holley.
Holley said the loan is secured by user fees from a surcharge on bus tours levied at the Kennedy Space Center since 1990. A surcharge on movies at the center could be used if necessary, he said. No federal or state tax dollars have been pledged.
The bus tour surcharge generates about $3 million a year and has so far provided about $11.8 million for a capital improvement account for the museum, of which about $6 million has been spent, Holley said. The financial adviser said he did not expect loan drawdowns to exceed $22 million.
SouthTrust's bank loan allows the borrower to choose between one of two variable rates: the prime rate or the London Interbank Offered Rate plus 175 basis points. The authority also has the option to borrow at a fixed rate equivalent to the five-year Treasury note rate plus 210 basis points.
Al Thomas, a project manager at the authority, said Spaceport Florida hopes to finalize a second financing by yearend to fund a rocket storage facility for Martin Marietta Corp. He said the borrowing, which could either be a bank loan or a taxable bond issue, could total about $25 million.