Official Statement Airport Commission City and County of San ...

Issues 37B/C. The Commission entered into two forward starting interest rate swap agreements in
connection with the issuance of the Issue 37B/C Bonds. The counterparties to these interest rate swap agreements
are BSCM with respect to an aggregate notional amount of $89,856,000 and Merrill Lynch Capital Services, Inc.
(“Merrill”) with respect to an aggregate notional amount of $79,684,000. The payment obligations of BSCM are
guaranteed by J.P. Morgan. The payment obligations of Merrill are guaranteed by Merrill Lynch & Co. which, as of
January 15, 2010, was rated “A2” by Moody’s, “A” by Standard & Poor’s and “A+” by Fitch.
Pursuant to these swap agreements, commencing May 1, 2008, the Commission receives a monthly
variable rate payment from each counterparty equal to 61.85% of USD-LIBOR-BBA, plus 0.34%, times the notional
amount of the swap, which is intended to approximate the variable rate interest payments the Commission will pay
on a portion of the Issue 37B/C Bonds. The Commission makes a monthly fixed rate payment to the counterparties
as set forth below. These interest rate swap agreements are terminable at any time at the option of the Commission
at their market value. The objective of these interest rate swap agreements was to achieve a synthetic fixed rate with
respect to $169.54 million principal amount of the Issue 37B/C Bonds. In December 2008, the Commission applied
a portion of the proceeds from the issuance of the Series 2008B Notes to purchase and hold in trust the Issue 37B
Bonds hedged by the Issue 37B Swap Agreement. The Issue 37B Swap Agreement continues to hedge the
Issue 37B Bonds.
2010A Bonds. The Commission entered into two forward starting interest rate swap agreements in
connection with the anticipated issuance of the 2010A Bonds (formerly referred to as the Issue 35 Bonds) in 2010.
The counterparties to the Series 2010A Swap Agreements are DEPFA BANK plc (“DEPFA”) with respect to an
initial notional amount of $71,973,000 and Goldman Sachs Capital Markets, Inc. (“Goldman”) with respect to an
aggregate initial notional amount of $143,947,000.
As of January 15, 2010, the payment obligations of DEPFA were rated “A3” by Moody’s, “BBB” by
Standard & Poor’s and “A-” by Fitch. Given the decline in ratings for DEPFA, the Airport and its advisors have
reviewed this interest rate swap agreement in contemplation of a potential optional termination by the Airport.
Instead, the Airport has negotiated more favorable terms with respect to this swap which will remain in effect until
such time as DEPFA's ratings recover adequately. These measures include the posting of collateral by DEPFA in an
amount in excess of $4 million, even though that swap currently has a favorable termination value to DEPFA in
excess of $8.6 million as of January 15, 2010.
The payment obligations of Goldman are guaranteed by the Goldman Sachs Group, which, as of January
15, 2010, were rated “Aa3” by Moody’s, “A” by Standard & Poor’s and “A+” by Fitch.
Pursuant to these swap agreements, commencing February 1, 2010 the Commission will receive a monthly
variable rate payment from each counterparty equal to 61.85% of USD-LIBOR-BBA, plus 0.34%, times the notional
amount of the swap, which is intended to approximate the variable rate interest payments the Commission will pay
on a portion of the 2010A Bonds. The Commission will be obligated to make a monthly fixed rate payment to the
counterparties as set forth below. These Series 2010A Interest Rate Swap Agreements are terminable at any time at
the option of the Commission at their market value. The objective of the swaps is to achieve a synthetic fixed rate
with respect to $215.92 million principal amount of 2010A Bonds.
The Swap Payments, other than those relating to the termination of the interest rate swap agreements, are
payable on a parity with the Bonds.
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