Strong interest in KCI project as city issues largest bond package in history; Terminal modernization bonds will be repaid by airport revenue


On behalf of the City of Kansas City, Missouri, the Kansas City Industrial Development Authority (“KCIDA”) on June 12 successfully priced a total of $887.7 million in bonds related to the project to build a single terminal at Kansas City International Airport. The total includes $826.025 million of Series 2019B Special Obligation Bonds (AMT) and $61.675 million of Series 2019C Special Obligation Bonds (NON-AMT) for the Airport Terminal Modernization project through a negotiated sale led by Morgan Stanley & Co. LLC as senior manager. The issuance was authorized by KCIDA resolution and City Ordinance Nos. 190027 and 190028 to appropriate and fund the $875 million project account. The true interest cost on the bonds was 3.884%.

“The positive response from investors to today’s pricing is a resounding reaffirmation of the Build KCI project,” said Pat Klein, director of aviation. “In meetings with the investment community last week there was clear understanding of the need for the new single terminal, the strength of the Kansas City region, and the structure of the agreement between the airlines and the Kansas City Aviation Department. I am grateful for the tireless work of Aviation staff in preparing for today’s successful result.”

The proceeds of the Series 2019B and C bonds will be used to fund the first phase costs of the City’s $1.5 billion Airport Terminal Modernization project. Edgemoor Infrastructure and Real Estate LLC is the developer selected by the City for the terminal modernization project. The bonds are secured by net airport revenues paid to the trustee by the City, subject to City Council appropriation.

Interest in the issue was strong, as over $2.5 billion in orders were submitted by 66 investors, resulting in the issue being 2.8 times oversubscribed. Thirty-one of those investors submitted orders exceeding $20 million or more, with seven submitting orders in excess of $100 million.

“The strong response from investors not only shows our new single terminal airport to be a smart investment, but illustrates the financial industry’s confidence in the economic future of our region, and the skillful, careful planning that continues to drive the Build KCI effort,” said Mayor Sly James. “I’d like to thank city staff and Councilwoman (Jolie) Justus for their steady leadership throughout this process.”

“There is still a lot of work to do on Build KCI but we are one step closer to delivering a world class terminal. The positive response from the investment community further proves that Kansas City is moving forward,” said Justus, chairwoman of the city council’s airport committee.

The issuance follows the $98 million private placement in March that funded up-front costs associated with the project. We anticipate that the final bond issuance will be take place in about two years. The phased issuance allows the City to save on interest costs associated with financing the project, and will accurately reflect the final borrowing necessary to complete the project.

The bonds are rated “A2” by Moody’s Investor’s Service, “A” by S&P Global Ratings, and “A” by Fitch Ratings, except for the bonds maturing in 2049 and 2055 which were insured by Assured Guaranty and rated “A2” by Moody’s and “AA” by S&P. Morgan Stanley led the underwriting syndicate for the sale, which included Barclays Capital Inc., Bank of America Merrill Lynch, Citigroup Global Markets Inc., George K. Baum & Company, Loop Capital Markets, Siebert Cisneros Shank & Co. LLC, SMBC Nikko Securities America Inc., Valdes and Moreno, and UMB Bank NA.

Hilltop Securities, Inc. and Moody Reid Financial Advisors served the City on the transaction as co-financial advisors. Kutak Rock, LLP, The Hardwick Law Firm, LLC, and Martha E. Schach, Attorney at Law, LLC served as co-bond counsel on the transaction. BOKF, NA serves as trustee on the issue.

For more information, please contact Doug Buehler, City Treasurer, at 816-513-1024.