The Branson Airport is seeking $23 million in new financing, but first needs approval from bondholders.
A letter to bondholders Friday proposed the airport would raise up to $23 million to “provide working capital and liquidity needs for the support of the continued operation and development of the airport.”
Bondholder approval — a full 100 percent — is needed because the financing would be secured by first position liens on and security interest in assets that are currently serving as collateral for bondholders.
Jeff Bourk, executive director of the airport, said he could not go into detail on the proposal but that it was “a positive thing for the airport.”
The financing, according to the proposal, would be used to:
• Provide immediate payment of accounts payable “such that service commences according to plan.”
• Meet the company’s projected liquidity needs through the end of the year.
• Provide the company with adequate time to deliver improved operating performance and achieve growth potential.
• Reduce uncertainty to the company by limiting costs and risks associated with significant restructuring.
Michael Hynes, an aviation expert the city of Branson has used for guidance, said he believes the airport has already put everything into place to complete the financing, as the buyers of the new funding are listed as existing investors and bondholders.
“The existing investors are trading unsecured loans into high-interest paying secured debt and most important of all, they are removing restrictions now in existence,” he said.
Hynes said he believes one problem with the proposal is that the airport isn’t seeking enough money.
He said something more like $50 million was needed, and it would take about five years.
He also said the revenue projections were optimistic.
“The numbers that support the proposal do not have the credibility I think they should have,” he said.
He said initial projections that were “400 percent too optimistic” is what got the airport into its current financial situation.
At the heart of future projections is what affect the arrival of Southwest Airlines will have. The company is set to replace AirTran planes in March of 2013.
Bob Montgomery, vice president of airport affairs for Southwest, said earlier this year that the company has had a positive impact on every airport its joined.
Hynes said the three comparisons used to project Branson Airport’s growth, airports in Panama City, Fla., Charleston, S.C., and Greenville, S.C. missed some key information.
He said passengers that used to fly to Tallahassee and Pensacola switched to Panama City.
“Branson is not taking the place of any other airport,” he said.
Additionally, industrial and population growth in the other two markets pointed to an unrealistic comparison, Hynes said.
“In Charleston, Boeing had invested $1 billion in a manufacturing facility,” he said. “And Greenville is one of the fastest growing areas in the United States of America.”
He said he didn’t dispute that Southwest Airlines would be positive for Branson and the airport.
“I agree the Southwest name is good for Branson,” he said.
The initial funding of the agreement would provide $18 million, with an additional $5 million as an option to the lenders.
Of the $18 million, more than $10 million is slated for “operating expenses shortfall.”
Another $2.78 million would go toward working capital.
With interest, plus more than $4 million total going to transaction costs and reserves, Hynes said the agreement amounted to about a 25 percent interest bond.
“Unless you’re selling drugs or sex, you can’t pay 25 percent interest,” he said.
The airport is currently under a forbearance agreement with bondholders that was extended in July to June 30, 2013.
A conference call with bondholders and the airport to discuss the new proposal is scheduled for Nov. 15, according to a letter sent to bondholders.
Trustees representing the airport could not be reached as of press time.