Indianapolis-based City Securities Corp. is leading a $390 million bond issue for the Indianapolis International Airport expansion. To snag the deal, it overcame a host of far larger competitors on Wall Street.
To paraphrase Mark Twain, reports of the death of local investment banking are greatly exaggerated.
It's the second-largest bond deal in City Securities' 82-year history, surpassed only by the city's 2002 purchase of Indianapolis Water Co. for $580 million. City Securities also led the water deal.
"We've done a lot of work around the city and state for more than 80 years," said City Securities Vice Chairman James Merten, who manages its bond division. "We're very pleased with this opportunity."
The airport deal has been decades in the making. Plans for a new airport have been on the drawing board since the mid-1970s, Merten said. In 2003, the Indianapolis Bond Bank began issuing a series of annual bonds to back the $1 billion project.
City Securities helped underwrite each phase, but New York-based Lehman Brothers Inc. led the first two rounds of the series. Zurich, Switzerland-based UBS AG led the 2005 issue. City Securities' involvement with those issues and the water company transaction bolstered its investment banking reputation, even without a Manhattan address.
Last week's $390 million issue, which included a syndicate of five banks, will pay mainly for construction of the airport's midfield terminal. The local law firms of Ice Miller and Baker & Daniels both provided legal counsel on the deal. A final bond issue to finish the project is slated for 2008.
Bank industry consolidation in the late 1980s and early '90s left few local investment banks standing. But the Indianapolis Bond Bank, the public agency that issues municipal debt in Marion County, has become confident in City Securities' abilities.
"We certainly think it's important to encourage local vendors to participate, and City Securities is reputable across the entire market," said Katie Aeschliman, Indianapolis Bond Bank senior project manager. "They'd be a good choice no matter what we were working on. The fact that they're local is even better."
The bonds' sale is slated to close June 20. They're backed by airport revenue, which fluctuates along with the volatility of fuel prices and air-carrier profits. That made them trickier to price than the public school or jail expansions that are backed by taxes and are City Securities' bread and butter.
Proportionately, the airport deal is a huge share of City Securities' total bond business. Last year, the firm handled $2.7 billion worth of bonds; the airport deal alone was worth about oneseventh of that.
It's also a big deal for the Indianapolis Bond Bank. As of Jan. 1, it had $3.1 billion in debt outstanding for projects pending in Marion County, Aeschliman said.
"[Nearly] $400 million in one issue is huge for us," she said.
Last week, local news outlets were abuzz with reports that London-based BAA PLC, the private firm that manages the airport, will be sold to Madrid, Spainbased Grupo Ferrovial, parent of the firm that leased the Indiana Toll Road from the state.
But the ownership change won't affect the bond sale or airport expansion plans at all, said Jeremiah Wise, assistant project director of the Indianapolis Airport Authority. The locally managed Airport Authority is responsible for all decisions related to the expansion project.
"They've done a great job on this
issue, as well as on previous issues,"
And the Airport Authority is pleased with City Securities' work.