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