AirportCargoFacility

FinancingOptions
2008ACINAAirCargoConference
March2627,2008

AdamWhiteman
ManagingDirector

FRASCA & ASSOCIATES, L.L.C.

AirCargoFacilityFinancing

CreditMarketUpdate

CargoFacilityFinancingOptions

FRASCA & ASSOCIATES, L.L.C.

AirportFinancingsAre50+YearsOld
Airportfinancingbeganinthe1950s.In1955,DadeCounty,Floridasissuance
ofPortAuthorityRevenueBondswasoneofthefirstGARBsissuedintheU.S.
(thatwasntaconsolidatedrevenuepledge).

FRASCA & ASSOCIATES, L.L.C.

USAirportFinanceOptions
GeneralAirportRevenueBonds(GARBs)
SpecialFacilityorSpecialProjectsBonds
SpecialRevenueStreams
CarRentalFacilityCharges(CFC)
PassengerFacilityCharges(PFC)

AirCargoFacilities
Standalone
Cargopools

Concessions
Retailconcessions
Fuelsystems

Privatization
SpecificTerminalFacilityor EntireAirport
FRASCA & ASSOCIATES, L.L.C.

CurrentMarketConditions
Downgradesofseveralmonolinebondinsurers
Flighttoquality wideningcreditspreads
Volatilevariableratemarkets
Failedauctions
HigherratesforVRBDsbackedbymonolines

FRASCA & ASSOCIATES, L.L.C.

MostAirportDebtHasBeenInsured
100%

$14,000

90%

$12,000

80%

$10,000

70%

$8,000

60%

Refunding

50%

NewMoney

$6,000

40%

%insured

$4,000

30%
20%

$2,000

10%

0%
2000 2001 2002 2003 2004 2005 2006 2007

FRASCA & ASSOCIATES, L.L.C.

MonolineRatingsHaveFallen
Insurer
FSA
Assured
Guaranty
MBIA
AMBAC
CIFG
FGIC
XLCapital
FRASCA & ASSOCIATES, L.L.C.

Moodys

S&P

Fitch

Aaa

AAA

AAA

Stable

Stable

Stable

Aaa

AAA

AAA

Stable

Stable

Stable

Aaa

AAA

AAA

Negative

Negative

Negative

Aaa

AAA

AAA

Negative

Negative

Negative

A1

A+

AA

Stable

Negative

Negative

A3

AA

Underreviewfor
downgrade

CreditWatch
Developing

RatingWatch
Negative

A3

Underreviewfor
downgrade

CreditWatch
Negative

RatingWatch
Negative
7

$1.7TrillioninDebtAffectedByRating
andOutlookChanges
$591B

FRASCA & ASSOCIATES, L.L.C.

$1,200B

$449B

HowMonolineDowngradesMayAffectAirport
Debt
Increaseinissuancecostsforairports
Creditspreadshavewidenedasinvestorslookthrough

insurance

Failedauctions
Auctionfailurerateapproaching70%

Ratesresetbyauctionweekly,monthly,etc.
Ifnobuyersthenratesmaygouptopredetermined
amount,insomecasesto20%

Debtservicereservefund
Mayneedtobecashfundedtoreplacesureties

Increasedongoingdisclosurewillbeexpected
byinvestors
FRASCA & ASSOCIATES, L.L.C.

TypesofAirCargoFacilityFinancings
Integrators SpecialFacilityBonds
FedEx,UPS,etc.
Strongcorporatecredits
Wellacceptedfinancingmechanism

StandaloneCargoFacilityBonds
Example:JFKAeroLLC
Standaloneprojectfinancestructurebaseduponstrengthofcargo
marketandsubleases

CargoPoolFinancing
CargoAcquisitionCompaniesObligatedGroup

FRASCA & ASSOCIATES, L.L.C.

10

StructuringAirCargoFinancings

BenefitstoAirports:
Offersrevenuediversificationopportunitieswithout
impactingairlineratebase
Allowsforproductiveuseofunusedorunderutilized
facilitieswithoutMIIapproval

FRASCA & ASSOCIATES, L.L.C.

11

StructuringAirCargoFinancings
CreditStrengths:
Historicaltrendsofgrowthinaircargo
GlobalizationofproductionandJITbusinessmodelbodeswellfor
continuedgrowth
Onairportfacilities:
Highdemandfordirectairsideaccess
Limitedairside capacityatmajorairports

Localmarketfactors:
Infrastructure offorwardersandbrokers
Localversustransfer(airairorairground)traffic
Destinationmarketsandaccessissues

Pooledfinancings:
Canbestructuredasjointandseveralobligations
Revenueandriskdiversification

Strengthofreletprovisions
FRASCA & ASSOCIATES, L.L.C.

12

StructuringAirCargoFinancings
CreditConcerns:
Narrowrevenuestreams
Nonairsidefacilitiesprimarilyservesbellycargoandfreight
forwarders
Cargofacilityleasesusuallyshorterthanthelifeoftheissue
Weakcargoairlines,otherthantheintegratedcarriers
Poolparticipantsmaychange
Competitionfromfacilitiesbothonandoffairport
Transportationsecurityissuesmayincreasecostsgoingforward
Constructioncostescalation
Levelsofreservesandcaptureofexcessrevenuesifneeded
FRASCA & ASSOCIATES, L.L.C.

13

StructuringAirCargoFinancings
Performance:
Limitednumberofratedcargodeals(excludingairline
specialfacilitydeals)
RatedsignificantlylowerthanGARBobligations
Limitedamountofongoingpublicinformation

FRASCA & ASSOCIATES, L.L.C.

14

StructuringAirCargoFinancings
LessonsLearned:

Standalonecargodealscanbedoneundercertainparameters
Currentenvironmentprobablywillprecludemonolineinsurers
Unratedprivateplacementismostrealisticoption
Dealswillhavetostandaloneontheirownmerits
Demonstratedcoverageofatleast1.50xifnotmore
Adequateprefundedreservestocoverlossoftenantsduring
leaseterm
Restricteddistributionofexcessrevenuesafterpaymentof
debtserviceduringperiodsoffinancialstress

FRASCA & ASSOCIATES, L.L.C.

15

FRASCA & ASSOCIATES, L.L.C.

521 Madison Avenue, 7th Floor
New York, NY 10022
212 355-4050
www.frascallc.com