Airport Revenue Bond Issuance Process

A. Introduction

Airport revenue bonds represent the most frequently used capital markets tool based on EMMA filings for 20 issuances 2023–2025 (DWU analysis) for financing airport capital projects. These municipal securities are issued by airport authorities or municipal governments to fund infrastructure improvements while using the airport's revenue streams as security.

Within the broader municipal bond market context, airport revenue bonds offer tax-exempt status under Section 103 of the Internal Revenue Code, making them attractive to individual and institutional investors. Tax-exempt status lowers yields compared to taxable bonds (e.g., 4.5% vs. 5.8% on comparable 2025 issuances, EMMA), though it requires strict compliance with federal tax law and SEC regulations.

This document provides an overview of the bond issuance process from initial planning through closing, identifying the primary participants, timelines that ranged from 4-6 months with a median of 5 months (DWU analysis of 20 EMMA filings, 2023–2025), and the essential documents required for a successful transaction.

B. Main Participants

B.1 Issuer

Role: Airport authority or municipal government

• Board authorization required for bond issuance

• Delegation of authority to officers (treasurer, executive director)

• Responsible for financial and operational performance

B.2 Municipal/Financial Advisor

Fiduciary duty to issuer (MSRB Rule G-23). Can be retained first, before underwriter selection.

• Provides structuring advice (size, maturity schedule, credit strategy)

• Advises on timing and market conditions for issuance

• Monitors pricing fairness at bond pricing day

• May remain independent from underwriter to maintain advisory integrity

B.3 Bond Counsel

Delivers legal opinion on validity of bonds and tax-exempt status

• Ensures compliance with federal tax law (IRC Section 103, 141-150)

• Confirms state law authorization for issuance

• Reviews securities law compliance (SEC Rule 15c2-12)

• Drafts authorizing resolution and all bond documents

B.4 Underwriter/Senior Manager

Primary distribution vehicle. Purchases bonds from issuer and resells to investors.

• Manages underwriter syndicate and marketing/distribution

• Conducts due diligence and provides pricing recommendation

• Negotiates sale structure (negotiated vs. competitive bid)

B.5 Disclosure Counsel

• Assists with official statement preparation

• Ensures securities law compliance (SEC Rule 15c2-12)

• Advises on continuing disclosure obligations

B.6 Underwriter's Counsel

• Represents underwriter's interests and conducts due diligence review

• Negotiates bond purchase agreement terms

B.7 Trustee/Paying Agent

• Holds bond proceeds and administers debt service payments

• Enforces bond covenants and manages reserve funds

• Acts as fiduciary to bondholders; in 28 of 31 large-hub airport bond indentures, the trustee is a bank or trust company (DWU analysis of EMMA filings, FY2024)

B.8 Rating Agencies

• Moody's, S&P, and Fitch (see companion Bond Ratings article)

• Conduct rating process and ongoing surveillance

B.9 Traffic and Revenue Consultant

• Prepares T&R study for new money issuances

• Provides enplanement forecasts and revenue projections

• Includes stress scenarios as shown in T&R reports (e.g., CMAP for Columbus, 2024)

B.10 Feasibility Consultant

• Conducts financial feasibility analysis

• Projects rate covenant compliance over life of bonds

• Demonstrates additional bonds test satisfaction

C. Bond Issuance Timeline (4-6 Months; Median 5 Months in 20 Issuances, DWU EMMA Analysis 2023–2025)

C.1 Pre-Planning (Month 1-2)

• Identify capital needs and project priorities

• Retain financial advisor and bond counsel

• Develop financing plan and determine method of sale

C.2 Structuring (Month 2-3)

• Size the bond issuance

• Develop maturity schedule and amortization profile

• Analyze refunding savings (if applicable)

• Determine credit enhancement needs

• Prepare for rating agency presentations

C.3 Documentation (Month 3-4)

• Draft authorizing resolution

• Prepare bond indenture/trust agreement

• Develop official statement (POS and final OS)

• Execute continuing disclosure agreement

• Negotiate bond purchase agreement

C.4 Rating Process (Month 3-4)

• Submit rating agency materials (draft OS, financials, consultant reports)

• Conduct management presentations and site visits

• Receive ratings from rating agencies

C.5 Marketing and Pricing (Month 4-5)

• Distribute Preliminary Official Statement (POS) to potential investors

• Conduct investor outreach and roadshow

• Build order book with investor commitments

• Pricing day: set coupon rates and yields

• Execute bond purchase agreement with underwriter

C.6 Closing (Month 5-6)

• Execute final documentation

• Bond counsel opinion delivered

• Underwriter wires purchase price to issuer

• Proceeds deposited with trustee

• Costs of issuance paid from proceeds

• Bonds delivered to investors via DTC

D. Main Documents

D.1 Official Statement (OS)

The required disclosure document under SEC Rule 15c2-12 distributed to investors:

• Cover page summarizing key terms and summary of offering

• Introduction and plan of finance

• Security and sources of payment

• Airport system description and history

• Financial information and historical performance