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Houston updates council on $2.55 billion in Terminal B financing tied to United Airlines lease
Summary
Finance staff told the committee that Terminal B expansion financing will use up to $1.95 billion in special facility revenue bonds backed by United lease payments and up to $624 million in general airport revenue bonds, with initial issuance expected in winter 2024 and two council actions planned this fall.
Finance Director Melissa Dubowsky briefed the Budget and Fiscal Affairs Committee on Sept. 9 about planned financing for the Terminal B expansion at the Houston airport under a memorandum of agreement with United Airlines.
Dubowsky said the total transaction size is anticipated to be about $2.55 billion, split between special facility revenue bonds (SFRBs) capped at $1.95 billion — secured by United lease payments and not the general airport or city revenues — and general airport revenue bonds capped at $624 million. "The Expansion Terminal B is going to be financed with a combination of special facility revenue bonds and general airport revenue bonds," she said, adding that the SFRBs "are solely secured from United lease payments."
She told the committee the finance working group is refining an amortization schedule and targeting a true interest cost near 5.56% for the initial tranche. Dubowsky said city council will need to take two separate actions before issuance: approval of the amended lease agreement (expected in October) and approval of the bond terms and sale. She said the initial issuance is expected in winter 2024 and that the finance team is coordinating with outside advisors and bond counsel.
Council members asked whether the amortization schedule would be ready before initial issuance; Dubowsky said the schedule showing principal and maturity dates will be available to council when the bond terms come forward though the exact interest rate will not be known until pricing.
Next steps: staff will present the lease amendment and the bond-term RCA to council in October and return with final amortization details ahead of any sale.
