JFK Terminal One sponsors tap banks for project backing

04 January 2019 - 12:00 am UTC

The equity sponsors behind John F. Kennedy International Airport’s Terminal One project are in talks with a group of banks to fund the USD 7bn project.

Four sources briefed on the situation said the bank financing is among multiple alternatives being explored which are also expected to include Private Activity Bonds (PABs).

The talks are preliminary and financial close is not expected until later in the year.

Banks approached for the funding includes HSBC, ING, MUFG, SocGen and other investment banks.

The Port Authority of New York and New Jersey (PANYNJ) approved the development and expansion of the Terminal One on 4 October. The consortia behind the project includes airlines, financial sponsors and operating partners. 

The sponsors and operating partners include Carlyle Group’s dedicated airport platform CAG Holdings, JLC Infrastructure, Ullico and Munich Airport.  The airlines, which make up the Terminal One Group association, are Air France, Lufthansa, Korean Air and Japan Airlines.

Private Activity Bonds (PABs), which have already had a significant influence on the financing of US airport projects, could drastically reduce the role of bank debt for the JLK Terminal One project. The consortia behind LaGuardia’s Terminal B project had been negotiating with banks, but ultimately placed USD 2.5bn in PABs to fund the deal, said one of the sources. Those bonds  were 10x oversubscribed at the time.

But the sponsors for the JFK Airport project had been eyeing up to USD 6bn in tax-exempt bonds of project.

Down the road, there also could be other subsidized assistance for airport projects after US Senators introduced legislation in September that would allow airports access to TIFIA bonds.

Citi and MUFG are among the advisors (financial) on the project for the consortium, said the sources. The PANYNJ engaged Skadden (legal) to assist on the master lease negotiations with the consortium. O’Melveny & Myers (legal) and Aviation and Airport Professionals (technical) advised the airlines on the deal. 

PANYNJ declined comment on the situation. Carlyle did not return calls seeking comment.

Project details
The new Terminal One will encompass three million square feet of terminal space on what is now Terminal One, Terminal Two and the site of the former Terminal 3 with 23 new gates (potentially increasing to 27) and additional aircraft parking positions.

The new terminal has also committed to environmental sustainability for its redevelopment of JFK. This would reduce energy use in the terminal by 30 percent and switch its power source to 50% renewable energy, with a target to increase that number to up to 100% by 2025.

Construction is expected to begin in early 2020 and conclude in the second half of 2025, with the new terminal opening in phases to minimize interruption

The development is part of a wider redevelopment at JFK that also includes the redevelopment of Terminals 5, 6 and 7. JetBlue Airways  selected Vantage Airport and RXR Realty were selected as preferred bidders on that project.