HDOT Airports Division refinances debt for significant savings, provides funds for critical projects at historically low rates

Posted on Oct 7, 2020 in Airports News, Main, News

HONOLULU – The Hawaii Department of Transportation (HDOT) is pleased to announce that the Airports Division has successfully refinanced $300 million of outstanding bonds for significant savings. In addition, the Airports Division took advantage of historically low interest rates in the municipal bond market to finance capital projects, delivering critical funding to advance projects that will maintain, preserve, and expand air service facilities across the State.

The bonds that were refinanced were originally issued in 2010 and 2011 with an average interest rate of 5.00% and a final maturity in 2039. The new bonds have an average cost of 2.79% with the same final maturity in 2039. The refinancing will generate over $100 million of savings over the next two years, providing an immediate reduction in costs that will help the Airports Division combat the challenges of COVID-19.

The Airports Division also sold $300 million of new revenue bonds to fund essential capital improvement projects as HDOT continues to invest in the State’s airports. The bonds have an average interest rate of 3.35% with a final maturity in 2050. The interest rate on the bonds sold today represents the lowest interest rate ever achieved by the Airports Division.

In preparation for the bond sale, the Airports Division’s management team led an extensive marketing campaign, highlighted by a live online presentation by senior representatives of the State, the Department of Budget & Finance (B&F), Department of Business, Economic Development & Tourism (DBEDT), HDOT, and the Airports Division. A total of 33 investors from across the country, who represent some of the largest accounts that buy municipal bonds, participated in the live presentation. The Airports Division also released a pre-recorded online presentation that was viewed by more than 50 local and national investors and further targeted investors in Hawaii with digital advertising on local websites. As a result, the bonds received an overwhelming response from investors with over $1.4 billion of orders from Hawaii and national investors.

“The Hawaii Department of Transportation and the Airports Division continue to act strategically to reduce costs while also delivering strategic projects critical to the state. Despite the challenges of COVID-19, the success of today’s bond sale provides strong evidence of the market’s long-term confidence in Hawaii and our Airports System,” said Gov. David Ige.

Prior to the bond sale, the Airports Division’s credit quality was reviewed by Moody’s Investors Service, S&P Global Ratings, and Fitch Ratings and received strong ratings of A1, A+, A+, respectively. The three rating agencies recognized the Division’s credit profile remains solid, noting that the Division entered the pandemic in a strong financial and operational position with an experienced management team and a history of well-managed capital planning, providing confidence the Division will be able to successfully navigate the decrease in air travel caused by COVID-19, which has significantly impacted the airport sector globally. Moody’s further noted its “expectation that demand for leisure travel to [Hawaii] remains relatively robust and will translate into stronger recovery when quarantine restrictions are relaxed.”

Morgan Stanley served as the lead managing underwriter for the bond sale, with BofA Securities as the co-senior manager. A Hawaii-based selling group was utilized to market the bonds to local retail investors.