Business Proposal Cover Letter for Airline Industry - PDF

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					Attachment A


                           COUNTY OF ORANGE, CALIFORNIA

                                REQUEST FOR PROPOSALS

                      UNDERWRITER SERVICES
  FOR JOHN WAYNE AIRPORT CAPITAL IMPROVEMENT PROGRAM GENERAL
    AIRPORT REVENUE BONDS AND PFC (PASSENGER FACILITY CHARGE) -
                          BACKED BONDS

Responses are due no later than October 14, 2008 at 4:00 PM (PDT). See below for
submittal instructions. Please limit your proposal, including cover letter, to fifteen (15)
pages.

    A. Introduction:

    The County of Orange, California (County) is requesting proposals from its approved panel
    of airport underwriting firms for proposed new financing(s) required to partially fund the
    Improvement Program of John Wayne Airport (Airport). The Improvement Program is
    permitted under an amendment to the 1985 Settlement Agreement between the County, the
    City of Newport Beach, and two citizens groups. The County may utilize a variety of
    financing alternatives to execute this program, including general airport revenue bonds, PFC-
    backed bonds, and short-term debt. The new financings may include tax-exempt and taxable
    components, and may be issued in multiple series during a multi-year period. All financings
    are subject to separate approval by the Public Financing Advisory Committee and the Board
    of Supervisors.

    B. Summary of Intent:

    The purpose of this request is to solicit proposals for underwriter services for the County’s
    proposed issuance and sale of municipal securities proposed for the Improvement Program or
    alternate forms of financing. The successful proposer(s) must be prepared to perform
    underwriter services by February 1, 2008 or subsequent date that the County may determine
    at its sole discretion.

    C. Background Information:

    John Wayne Airport is owned and operated as a department of the County of Orange. The
    five-member Orange County Board of Supervisors oversees the management of the County
    government. The Airport is accounted for as a self-supporting enterprise fund. The Airport
    is under the direction of the Airport Director, who is appointed by the County Executive
    Officer. A five-member Airport Commission, appointed by the County Board of Supervisors,
    acts in an advisory capacity to the Board on airport and air transportation matters.

    John Wayne Airport is the only commercial service airport in Orange County, California. It
    is located approximately 35 miles south of Los Angeles, between the cities of Costa Mesa,
    Irvine, Newport Beach, and Santa Ana. The service area includes 3 million people within the
    34 cities and unincorporated areas of Orange County. Operating primarily as an origination
    and destination facility for the traveling public, the airport served approximately 9.6 million

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    passengers during the 2007-08 fiscal year. General aviation aircraft at the airport are served
    by three fixed-based operators, which provide fuel, supplies, aircraft maintenance, flying
    instruction, and other related services.

    The County issued Airport Revenue Bonds to finance construction of the existing terminal
    and related facility improvements pursuant to a Bond Indenture, adopted in 1987, as
    amended and supplemented in 1993, 1996, and 2003 for the issuance of additional bonds.
    Each bond issue sold after 1987 was a refunding bond issue. The currently outstanding
    bonds, secured by a pledge of a first lien on Net Revenues (Revenues minus Current
    Expenses) of the Airport, were issued for $183,730,000. The bonds have a current
    outstanding balance of $80,210,000.

    In 2002, the 1985 Settlement Agreement was amended to allow the County to increase
    passenger capacity at the Airport and to build new facilities to accommodate additional
    passengers, while maintaining an environmentally sensitive operation. The Improvement
    Program includes construction of a new multi-level terminal building with six new
    commercial passenger gates, six new security checkpoints, baggage screening capacity
    enhancements, additional parking structures, new commuter facilities, and a utilities
    cogeneration plant.

    In 2003, the County retained financial consultant John F. Brown Company to assess the
    financial feasibility of undertaking the Improvement Program. In July 2005, the consultant
    completed the Improvement Program Financial Analysis and Preliminary Financial Plan
    report, wherein it concluded that the program was financially feasible and provided its
    analysis of various financing alternatives for the County’s consideration.    A preferred
    financing program was approved by the County Board of Supervisors in December 2005.

    Presently, the County is implementing the Improvement Program, which includes numerous
    capital projects totaling approximately $559 million. The program calls for substantial
    construction in four stages over a five-year period. In Stage 1, construction will start on a
    new south “remain overnight” (RON) aircraft parking area. Stage 2 will include the removal
    of the existing B1 Parking Structure (SouthWest) and the completion of the South RON
    aircraft parking area. In Stage 3, construction will start on a new terminal (Terminal C), new
    commuter/regional facilities, and a replacement parking structure. Stage 4 will include the
    completion of the new terminal, as well as relocation of operations to the new permanent
    facilities.

    Concurrent with the Improvement Program, the Airport anticipates undertaking
    approximately $93 million in ancillary capital projects, for a total capital program totaling
    $652 million. Funding for the capital program will be provided from various sources,
    including the following: (i) Airport cash; (ii) FAA Airport Improvement Program (AIP)
    grants; (iii) Transportation Security Administration (TSA) grants; (iv) general airport revenue
    bonds secured by Net Revenues (Revenues minus Current Expenses) of the Airport and short
    term lines of credit; and (v) Passenger Facility Charges (PFCs), some of which will be used
    to secure PFC-backed bonds. Total financing in (iv) and (v) is expected to be between $300
    million and $330 million.




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    Since 1987, all of the County’s airport revenue bonds have been rated investment grade.
    Current ratings assigned to outstanding airport revenue refunding bonds are Aa3, A+ and
    AA- from Moody’s Investors Service, Standard and Poor’s and Fitch Ratings, respectively.

    John Wayne Airport’s 2006-07 audited financial statements are available upon request.

    D. Proposal Response:

    The County has independently selected Sidley Austin LLP as bond counsel and disclosure
    counsel, and Frasca & Associates, L.L.C. as financial advisor, to serve on the financing team
    for the proposed bond issuance. The goal of this RFP is to select an underwriter or firms
    having the ability to meet the airport’s needs and appropriately structure and distribute the
    County’s airport financing.

    In responding to the RFP, the following points must be addressed:

    1. Please describe your firm’s experience in underwriting airport revenue bonds and PFC-
       backed bonds. Provide a list of such airport transactions for which your firm has served
       as Senior Underwriter or Co-Underwriter since January 1, 2003. In tabular form, list the
       sales date, issuing authority and airport, bond size, purpose, role of firm, ratings and/or
       insurance received, type of sale (negotiated or competitive) and any unique
       characteristics of the transaction.

    2. Please list the name(s) of key staff members who will be assigned to work on this project
       and include brief professional biographies including relevant airport experience.

    3. Please comment on the pricing of long term fixed rate and short term variable rate airport
       credits in the municipal market under current market conditions. Provide your views on
       the current penalty for bonds subject to the AMT. In addition, comment on the
       marketability of the long term fixed rate bonds based on John Wayne Airport’s current
       bond ratings in light of general market conditions, as they may be impacted by events in
       the airline industry.

    4. Given current interest rates, please discuss your firm’s proposed financing structure in
       detail, assuming a thirty-year term including a twenty-seven year amortization period.
       Identify the risks associated with your proposed structure and suggest methods to
       mitigate these risks. Comment on the economics and utility of bond insurance based on
       the outstanding ratings of John Wayne Airport. In addition, discuss issues surrounding
       credit/liquidity enhancement for variable rate bonds.

    5. Please outline your marketing plan, and discuss the expected distribution of the bonds
       between retail and institutional buyers. Describe your firm’s distribution capacities to the
       sectors to which the bonds will be marketed.

    6. Please provide a scale detailing coupons, yields and prices for a proposed long term fixed
       rate bond issue, with and without insurance, based on market conditions at the close of
       business on September 16, 2008. Provide your assumptions regarding the price of
       insurance.


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    7. Please provide your proposal for underwriting compensation (Gross Spread) for both a
       fixed-rate and a variable rate bond issue. Break down each component (including
       estimated expenses).

    8. Please indicate the firm and contact person you would choose as underwriter’s counsel.
       Provide the expected cost for their services, which should be included in the expense
       component of the Gross Spread.

    9. Describe the capital base of your firm. Provide a copy of your firm’s most recent focus
       report and any other recent data that attests to your firm’s financial strength and stability
       over the course of the last 6 months.

    10. Provide the name(s) of the person(s) who could best respond to any questions regarding
        your proposal, including telephone, fax number and email address.

    E. Selection Procedure:

        Proposals will be evaluated based on the criteria identified in Section F of this Request
        for Proposals. The evaluation panel may make a recommendation based solely on its
        review of written proposals or, at its discretion, invite top ranking firms to an interview
        before submitting its recommendation.


    F. Selection Criteria:

          Scoring Criteria                                                       Weighted Value
          1. Experience and Qualifications                                            (25)
             • Demonstrated prior experience with projects of similar
                scope and complexity
          2. Key Personnel and Resources                                                (25)
             • Demonstrated competence and experience of firm’s
                personnel responsible for performing work and providing
                services
             • Commitment to make staff available for the project
          3. Approach/Understanding of Project                                          (25)
             • Understanding of the project scope of work and the
                Airport’s objectives
             • Proposed approach for providing required services and
                achieving project completion
          4. Compensation                                                               (25)
             • Competitiveness of compensation proposal




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    G. Time Schedule:

    1.   Issue Request for Proposal                                   September 23, 2008
    2.   Proposal Due Date                                            October 14, 2008
    3.   Public Finance Advisory Committee (PFAC)                     November 6, 2008
    4.   Board of Supervisors Contract Award                          November 18, 2008


    The above dates, with the exception of the Proposal Due Date, are subject to change and for
    planning purposes only.

    Based on the number of proposals received, the County reserves the right to request oral
    presentations from submitting firms. If such presentations are conducted, they will be
    scheduled during the week beginning October 27, 2008.

    H. Proposal Submittal

    Five (5) hard (paper) copies and two (2) electronic copies in a commonly used format
    (Microsoft Word and/or Excel on CD-ROM preferred) of your proposal must be received by
    4:00 (PDT) on October 14, 2008 at the following location:

    John Wayne Airport
    3160 Airway Avenue
    Costa Mesa, CA 92626-4608
    Attn: Steve Siemion

    If there are any questions, please contact Thomas Beckett at (714) 834-5969 or
    thomas.beckett@ocgov.com, or contact Steve Siemion at (949) 252-6072 or
    ssiemion@ocair.com.

Your response must be received no later than 4:00 PM (PDT) on October 14, 2008. Please
limit your proposal, including cover letter, to fifteen (15) pages. It is the sole responsibility of
the proposer to meet the submission deadline. The County will in no way be responsible for
delays caused by delivery services or by any other occurrence. Further, the County will not
provide reimbursements for costs of proposal preparation.

Questions regarding this Request for Proposals should be directed to Thomas Beckett at (714)
834-5969 or thomas.beckett@ocgov.com; or to Steve Siemion, Interim Finance Manager,
Finance and Administration at (949) 252-6072 or ssiemion@ocair.com.

The County may reject any and all proposals received in response to this Request for Proposals.
Further, the County reserves the right to waive any and all deficiencies in any proposal and to
negotiate a contract, including standard County contract requirements, with the selected firm(s).




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