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Branson Airport seeks to restructure debt

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Nearly four years after the Branson Regional Airport Transportation Development District issued $114 million in municipal bonds to build Branson Airport, officials reportedly are in talks with Goldman Sachs and bondholders to restructure the airport’s debt.

The first privately owned and developed airport in the nation had to draw on its supplemental reserve fund to make two bondholder payments totaling $3.78 million due Jan. 1, 2010, and July 1, 2010, according to a Jan. 3 bondholder notice filed with the Municipal Securities Rulemaking Board. Bondholders also were informed of a $500,000 advance by UMB Bank, effective Dec. 29, to pay operating expenses.

Goldman Sachs manages the bonds, and UMB serves as trustee for the bondholders.
In the same notice, the airport indicated it might have to again dip into reserve funds for its 2011 debt service on the 2007 series bonds underwritten by Citigroup.

Airport financials indicated a net loss of $3.8 million in fourth-quarter 2010, leading to a $13.7 million loss on the year, according to Feb. 2 Municipal Securities filings. Since Branson Airport opened May 11, 2009, it has posted a loss of $19.9 million.

“A lot of projects aren’t doing as well as anticipated,” said Jim Lahay, a municipal bond expert with Stifel Financial Corp. in St. Louis. “I’m not being critical, I’m just saying bonds that were issued at that time, it’s caused a lot of projects to go back and restructure.”

Airport and UMB officials entered a confidentiality agreement Nov. 22 to allow the airport to receive nonpublic information regarding restructuring. A UMB spokesperson in Kansas City declined to comment for this story citing that agreement.

Big on bonds
After airport officials in 2007 received offers for $495 million in bond orders – which airport CEO Stephen Peet said at the time was a vote of investor confidence – organizers executed the purchase of $9.84 million in 2007A series bonds and $104 million in 2007B series bonds, each with 30-year maturities. The airport also raised $26 million in equity.

Armed with the new financing, airport officials moved 12 million yards of dirt in preparation for the 7,140-foot runway and terminal on the airport’s 922 acres within the Branson Creek development.

The number of enplanements during the airport’s first 12 months fell short of expectations. Between May 2009 and March 2010, the airport recorded 48,575 enplanements, according to the U.S. Department of Transportation Bureau of Transportation Statistics. Bourk had said 250,000 enplanements were possible by the end of 2009.

Multiple attempts to reach Peet and airport Executive Director Jeff Bourk were unsuccessful.

Lahay, Stifel Financial’s first vice president of public finance in St. Louis, said large bond projects have had mixed results of late.

“When you look at what happened in late ’08, ’09, and even in 2010, any big project, whether it be an airport or any other type of big project, probably isn’t performing as well as anticipated,” he said. “Who would have ever known in late ’06 or early ’07 what was going to happen in late ’08? You just can’t foresee those types of things.”

Revised budgets
Under normal restructuring procedures, Lahay said an agreement is reached with the institutions that bought the bonds. For Branson Airport to restructure this far in advance of the maturity date, he added, could indicate problems.

“There are all kinds of inefficiencies, unless they have some new strategy or maybe the existing bondholders are willing to take some discount on existing bonds,” Lahay said.  

In an Aug. 17 letter to Brian Krippner, UMB Bank vice president, the airport indicated plans to consider taking on more debt by issuing $17 million in completion funds.

The letter, filed with the municipal securities board, said the amount is 15 percent of the original face amount of the bonds issued in 2007.

Branson Airport expressed to certain bondholders the company’s belief that construction costs not financed with the initial bonds exist. The airport intended to issue the bonds in spring 2009 but determined that market conditions were not favorable.

On Sept. 24, airport officials posted an updated budget for the end of 2010 and spring 2011 to the MSRB Electronic Municipal Market Access.

Based on recorded and projected enplanements, and after payment to bondholders, the airport is scheduling monthly net losses July 2010–April totaling $4.6 million. May is expected to return a $6,025 profit, according to an updated analysis of the airport’s profit and loss statement filed with the municipal securities board.

City perspectives
The city of Branson has emphasized that its only involvement with the airport is the $8.24 it pays to the regional transportation development district for each passenger arriving at the airport.

The pay for performance goes toward bond indebtedness, Adams said. The city appropriated $35,000 initially in funding for the airport, and Adams said further amounts will depend on future travelers.

“We are not involved at all in what went into the bond financing,” Adams said.

During Springfield-Branson National Airport’s State of the Airport on Feb. 9, airline industry consultant Mike Mooney shed light on Branson Airport’s passenger volumes.

Branson Express, which now offers only charter service to Dallas and Austin, Texas, has not performed as well as hoped, said Mooney, air service strategy and development consultant with Eugene, Ore.-based Sixel Consulting Group Inc. The charter service’s overall load factor for third-quarter 2010 was 37.6 percent, which led the airline to cut flights from eight t0o two.

“Ladies and gentlemen, that is a train wreck,” Mooney told the crowd at the Springfield Area Chamber of Commerce.

Some flights by other airlines have fared better in Branson – Mooney cited Frontier service to Denver, with a load factor of 88.5 percent; and AirTran service to Atlanta, with a load factor of 80.9 percent.[[In-content Ad]]

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