The Hawaii Department of Transportation (HDOT) is pleased to announce that the Airports Division has successfully sold new airports system revenue bonds to deliver critical funding for projects that will continue to modernize and expand air service facilities across the State. At the same time, the Airports Division took advantage of low interest rates in the municipal bond market to refinance prior bonds for cost savings.
The new bonds will fund approximately $230 million of essential projects that will sustain the momentum of the Airports Division’s capital improvement program as HDOT continues to invest in the State’s airports. The bonds have an average interest rate of 3.44% with a final maturity in 2051. The interest rate on the bonds sold today represents one of the lowest interest rates ever achieved by the Airports Division, nearly surpassing the all-time low of 3.35% which was achieved in October 2020.
HDOT also successfully refinanced $57 million of outstanding revenue bonds for savings. The bonds that were refinanced were originally issued in 2011 with an average interest rate of 4.80% and a final maturity in 2024. The refinancing will lower the average cost to approximately 1.00%, reducing the debt service costs of these bonds.
In preparation for the bond sale, the Airports Division’s management team led an extensive marketing campaign, highlighted by a live virtual presentation by senior representatives of the State, HDOT, and the Airports Division. In attendance were investors representing some of the largest accounts in the U.S. that buy municipal bonds. The Division also released an online presentation for local and national investors and further targeted Hawaiian investors with digital advertising on local websites.
“Air service is essential to Hawaii,” said Gov. David Ige. “The Hawaii Department of Transportation and the Airports Division continue to act prudently to deliver projects to modernize and expand our facilities while also taking advantage of opportunities to reduce costs. These actions are instrumental as we continue to adapt to the COVID-19 pandemic, and the success of today’s transaction demonstrates the market’s continued confidence in Hawaii and our Airports System as we build for the future.”
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, each of whom affirmed the Division’s strong bond ratings of A1, A+, and A+, respectively. S&P raised the Division’s outlook to “Positive” from “Stable,” citing the recovery of domestic U.S. travelers to pre-pandemic levels, proactive measures taken by Division management, and the State’s long-term financial planning and resiliency as materially positive credit factors. Moody’s and Fitch both assigned “Stable” outlooks to the bonds, with Moody’s recognizing the Airports Division’s “strong financial flexibility to manage COVID-related pressures as passenger levels trend toward full recovery.”
“Strong credit ratings and a robust marketing effort proved instrumental in obtaining one of the lowest interest rates ever achieved by the Airports Division, despite selling the bonds in a difficult market,” said Ross Higashi, Deputy Director of the Airports Division. Volatility in the municipal bond market has increased in recent weeks, as investor sentiment continues to evolve in response to the global COVID-19 pandemic and economic announcements at the federal level.
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.
