Delta gets $1.4B loan for $4B LaGuardia terminal construction

Dive Brief:

Delta Airlines, through New York's Empire State Development (ESD) and Bank of New York Mellon, has secured a $1.38 billion loan package to help finance the renovation of its Terminals C and D at LaGuardia Airport, part of a $4 billion facility overhaul, according to Commercial Observer.
To fund the deal, Mellon purchased New York State Transportation Development Corp. (TDC) special facilities revenue bonds from ESD, which is a subsidiary of TDC. The cash then flowed to Delta as a $1.38 billion building loan leasehold mortgage and a $4 million project loan leasehold mortgage.
A Goldman Sachs-managed fund was Delta's original finance partner — committed to $300 million in equity investment and $3.6 billion in debt financing — but withdrew from the deal in July 2017. Delta then announced it would fund $3.4 billion itself and that the Port Authority of New York and New Jersey would contribute $600 million. The project broke ground in August 2017.

Dive Insight:

Construction on another $4 billion project is also underway at LaGuardia, and that is the replacement of the airport's Central Terminal B. The new terminal is being developed under a public-private partnership (P3) agreement between the Port Authority and LaGuardia Gateway Partners (LGP), which took on design, finance and operation duties in addition to construction.

In 2016, TDC issued $2.5 billion of special facilities bonds to help finance the project, according to Reuters. LGP will pay the debt back with airline and concession payments they will collect as part of terminal operations once construction is complete. The Port Authority gave $1.5 billion toward the project, and members of LGP covered the rest.

U.S. airports are struggling to come up with the cash to pay for critical modernization and expansion programs. In a February 2017 report, the Airports Council International-North America said it would take $100 billion through 2022 in order to make all the necessary upgrades. P3s have become a popular solution, although many airports finance their capital projects through the collection of airline and passenger fees. The Federal Aviation Administration (FAA) also pays for infrastructure upgrades at airports across the country but does not finance megaprojects like the $8 billion of terminal redevelopment happening at LaGuardia.

So, airport industry organizations were left disappointed earlier this year when Congress rejected the idea of lifting the $4.50 Passenger Facility Charge (PFC) cap as part of the $1.2 trillion spending bill. Airport advocates argue that this is one of the primary funding avenues for expansions and other capital construction programs, helping to pay for the work the FAA does not cover.