City and County of Denver Municipal Airport System ANNUAL ...

City and County of Denver
Municipal Airport System
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
December 31, 2010 and 2009
At December 31, 2009, the remaining net assets include unrestricted net assets of $235.6 million, which may be used to meet
any of the Airport System’s ongoing operations. Management of the Airport System has internally designated $67.3 million
of its unrestricted net assets amount, as allowed in the 1984 Airport System General Bond Ordinance as supplemented and
amended, to help meet debt covenant coverage requirements. In addition, ($291.1) million represents the Airport’s
investment in capital assets, net of related debt. A negative investment results because the outstanding indebtedness exceeds
the net book value of the capital assets funded by the indebtedness.
Long-Term Debt
As of December 31, 2010 and 2009, the Airport System had approximately $4.0 and $4.1 billion respectively, in outstanding
bonded debt (exclusive of deferred loss on bonds and unamortized premiums), both senior and subordinate, paying fixed and
variable interest rates. The total annual debt service (principal and interest) was approximately $336.5 million in 2010.
The Airport System’s senior lien debt is currently rated by Standard & Poor’s, Moody’s, and Fitch at A+, A1 and A+,
respectively, with Standard and Poor’s and Fitch giving the Airport a stable outlook and Moody’s rating the Airport with a
negative outlook.
The Airport System’s governing bond ordinances (the bond ordinance) require that the Airport System’s net revenues plus
other available funds, as defined in the bond ordinance, be sufficient to provide debt service coverage of 125% of the annual
debt service requirement on senior bonds. The debt service coverage ratio for the years ended December 31, 2010 and 2009
was 180% and 156%, respectively, of total debt service.
On March 9, 2010, the Airport System issued $171,360,000 of the Airport System Revenue Bonds Series 2010A Bonds in a
fixed-rate mode to currently refund all of the 2008A2 term-rate bonds (Subseries 2008A2 Bonds) and a portion of the
2008A3 and 2008A4 (Subseries 2008A3 and 2008A4) term rate bonds.
On February 5, 2010 and February 10, 2010, the Airport System terminated the 2007A swaps to monetize the economic value
of those agreements. The Airport System received $11,092,000 from the counterparties for the settlement of the agreements.
On January 12, 2010, the Airport System terminated the 1999 and 2002 Swap Agreements with RFPC Ltd, due to
deterioration in the credit ratings of AMBAC, the credit support provider for those swaps. The Airport System
simultaneously entered into an interest rate swap agreement with Loop Financial Products I LLC to replace the 1999 swap
agreement. The Airport System received $10,570,000 from Loop Financial Products I LLC to assist in paying the settlement
amount of $11,460,000 due to RFPC, Ltd. As a result of receiving $10,570,000 from Loop Financial Products I LLC, the
fixed rate to be paid by the Airport System to Loop Financials Products I LLC will take into account such payments and will
be above the market rate. The 2002 swap agreement was not replaced.
On November 6, 2009, the Airport issued $104,655,000 of Airport System Revenue Bonds, Series 2009C, in a variable rate
mode for the purpose of current refunding all of the Airport System Subordinate Commercial Paper Note, Series A.
On October 28, 2009, the Airport issued $170,190,000 and $65,290,000 of Airport System Revenue Bonds, Series 2009A
and 2009B (taxable “Build America Bonds”) in a fixed rate mode for the purpose of purchasing and retiring portions of the
Series 2006B, Series 2007D2, and Subseries 2008A4 bonds, and the funding of new money for capital improvement projects.
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