DALLAS -- While critics question the need for the $2.66 billion Denver International Airport project, supporters say they get all the reassurance they need from Wall Street.
"The buyers of the bonds are the ones who put confidence into this project," said Col. Leonard Griggs, assistant administrator for airports at the Federal Aviation Administration. "The Denver projections are good. The financial projections are good. The proof of that is that the bonds have always sold."
Today, the project again test market confidence with the pricing of $500 million of general airport revenue bonds to be sold by a group led by Lehman Brothers and Pryor, McClendon, Counts & Co.
With the latest deal, Denver will have sold $2 billion of debt and may sell as much as $3.1 billion of bonds by the time the new airport is scheduled to open in October 1993.
"We're expecting a good sale," said Kenneth Gibbs, senior vice president at Lazard Freres & Co., the project's financial adviser.
When Denver sold its last fixed-rate offering of $500 million in April, turmoil over the future of the airline industry and other uncertainties resulted in an interest cost of 9.128%. This time, Wall Street sources speculated that the bonds could be priced at 8.40%, or less, as interest rates continue to press lower.
"The response we have gotten [from investors] was very positive," said Patricia Beer, manager of revenue for Denver. "People are coming around to view this project more positively than in the past."
In a late development, Denver auditor Robert Crider, late yesterday questioned whether the city should sell more than $200 million in bonds today. "My concern was that they were borrowing more than they needed," he said. "I'm more concerned about the arbitrage than anything."
He declined to release the hand-delivered letter to Ms. Beer, which he said also raised other concerns. City officials could not be reached for comment.
Some uncertainties persist, however, including questions about the future of the two airlines that now dominate the Denver market.
These concerns were reflected by Standard & Poor's Corp. when it affirmed its BBB-minus rating of the project, while giving it a "developing" outlook.
"It's very rare for us to use that," said Todd Whitestone, managing director at Standard & Poor's. "We think the next three to six months are going to be crucial. It's either going to get better or worse."
In fact, by yearend many critical issues may be answered. Continental Airlines, the number two carrier at Stapleton International Airport, has until Nov. 28 to file a reorganization plan in its Chapter 11 bankruptcy case. Two days later, on Nov. 30, the city and United Airlines, the top carrier in Denver, face a deadline to negotiate a final lease agreement that will commit the Chicago-based carrier to the new airport.
Other analysts noted those concerns as they affirmed their ratings. Moody's Investors Service rates the deal conditional Baal, and Fitch Investors Service assigned it a triple-B. Both noted the strong local demand for air travel as credit factors.
"We were not surprised by the ratings," said George Doughty, director of aviation in Denver.
The city continues to negotiate a final lease agreement with United and has included $585 million in its latest capital program for the airport to accommodate the carrier.
As for continental, the city has delayed until April final decisions on the construction of concourse A, which the Houston-based carrier has the first rights to use. By then, the airline is expected to have filed a reorganization plan with the bankruptcy judge that would indicate its future commitment to Denver.
But other questions about who will use the airport, and ultimately help pay for its more than $250 million a year debt service, have arisen. Just last week, Federal Express, the giant overnight courier, said it had signed a letter of intent to use the Front Range Airport, which is about eight miles from the Denver airfield.
Mr Doughty said the decision is far from final and would not be a serious blow to the finances of the new airport. Of Federal Express's plan to locate at a nearby airport, he said, "We're somewhat skeptical that it will happen."
Besides, the FAA would likely have safety concerns about such a decision. "We're not going to tolerate an airport that will come on line and create traffic problems," Mr. Griggs said.
However, those kinds of issues are not a major concern for investors, who said they remain confident the construction of a new airport is a good move in the long term.
"I'm buying," said one fund manager. "You have to look beyond the headlines and ask if this is a good project several years out. My answer has always been the same: Absolutely."
In recent meetings with investors, Denver officials say they have gotten a good reception -- helped in part by an report on the projet from the General Accounting Office.
The GAO last month released its assessment of the project, finding that the city's projections for the airport were reasonable. It warned, however, that Denver's ability to meet debt service could be affected by changing circumstances, such as cost overruns, schedule slip-pages, the loss of a carrier that uses it as a hub, and a shortfall in traffic projections.
"It has been a plus," said Ms. Beer. "It has alleviated some of the concerns that were there."
But airport finance experts and local critics say the report relied too heavily on the city and its paid consultants for its analysis. They note that the projected debt service costs of the project -- $177 million in the GAO study -- is tens of millions of dollars below the project's own current estimates.
"I didn't see the GAO study as being all that wonderful," said Mike Boyd, president of Aviation System Research Corp. in Golden, Colo., and a critic of the project. "If this is so good for the nation, why couldn't we get the FAA to make some commitments for the bonds."
Already, the FAA has pledged $501 million for the project through this decade. Those funds account for half the government's $1 billion in letter-of-intent agreements.
Mr. Grigggs said his agency has invested so much because the new airport will play a critical role nationally as U.S. airports spend up to $45 billion by the decade-end to expand or renovate. But some question the need for new capacity at Denver and elsewhere.
"These are superfluous type projects," said Elliot Greenbaum, director of municipal research at Associated Investors Corp., who has advised his clients against buying the airport bonds. "Projects like this are the product of the 1980s when it was I want, I want, I want and not I need."
Mr. Griggs disagrees, saying the project is necessary. "At Denver today, when you get bad weather, you are down to one runway. When Denver stacks up, the whole system stacks up," he said. "I think this is an excellent project."