CHICAGO--United Airlines yesterday said it had selected the Indianapolis International Airport for a $1 billion, 7,000-employee maintenance base that triggered a bidding war by job-hungry cities across the nation.
One of the losing contenders was Denver, and many Wall Street traders wondered what the decision could mean for the near-junk rated Denver International Airport. The $2.66 billion facility is negotiating an agreement for United to use the airport when it opens in late 1993.
News of the decision has not affected the Denver airport's bonds, but the credit was quoted down 3/8 on the day in secondary trading. Denver Airport 7 3/4s of 2021 were quoted late in the session at 93 1/2-3/4 to yield approximately 8.31%.
"The bond didn't really trade off much on the news, but everybody's talking about it," said the head of a major New York-based trading desk. "The feeling seems to be that the project faces a lot of obstacles."
Gennifer P. Sussman, project finance director in Denver, was optimistic about the United decision and the negotiations. "We wouldn't expect it to have an impact on that at all," she said.
She said the city has given the Chicago-based carrier a proposed agreement, but could not say when a final agreement could be negotiated.
A final lease with United had been expected by late this year, but many now expect it to be early in 1992 because the deadline for Continental Airlines to file a reorganization plan in its Chapter 11 bankruptcy case has been extended to Feb. 7.
United is not expected to finalize a lease agreement for the new airport until it is clear what role Houston-based Continental will play in the future.
Analysis said the decision to build the jet maintenance center in Indiana will not affect the project's ratings.
"It certainly wasn't a key factor in our Denver rating," said Todd Whitestone, managing director at Standard & Poor's Corp, which rates the project BBB-minus. "We weren't counting on it."
The project's $2 billion in outstanding debt also bears a Conditional Baal from Moody's Investors Service and a BBB from Fitch Investors Service. Denver has said it expects to sell another $300 million fixed-rate offering in January.
Yesterday's decision had originally been expected in August, but United did not arrive at its short list of contenders -- Denver, Indianapolis, Louisville, Ky., and Oklahoma City -- until last week.
A United spokesman declined to say specifically why Indianapolis was chosen, but said geography, the work force, and financial incentives were a factor.
"The competition was extremely close," said United President Stephen M. Wolf in a statement. "Each of the finalists proposal was outstanding. We are keenly sensitive to the disappointment felt by those not chosen. Each assembled an impressive array of incentives and public support."
In the winning bid, the state of Indiana together with Indianapolis and Hendricks County offered the airline a combined incentives package of $291 million to locate the maintenance facility on 300 acres at Indianapolis International Airport, according to a press release issued yesterday by Gov. Evan Bayh's office.
David Dawson, a spokesman for Gov. Bayh, said the state's portion of the incentive package includes the issuance of $156 million of bonds, but added that the type of bonds and what state-related agency will issue them have not been decided yet.
"Today's decision by United Airlines could possibly be the most significant economic development project in the city's history," Indianapolis Mayor William Hudnut said.
Construction of the facility is expected to begin in August, 1992, with a completion by November 1994.