Privatization Of Midway On Hold
The newly-bankrupt Chicago Sun-Times reports that the deal to privatize Chicago’s Midway Airport may be on hold because of the current adverse credit conditions. While we have yet to hear about Milwaukee County Executive Scott Walker’s plan to private General Mitchell International Airport (partly because the County Board vetoed a study of the proposal), we might be able to draw a few rough comparisons from Midway’s proposed deal with MidCo (emphasis mine):
“The MidCo team has not been able to put together the combined package of equity and debt to come up with the $2.5 billion they are obligated to pay,” said a source close to the transaction…
…Asked to assess the chances the blockbuster deal will ever go through, the source said, “I wouldn’t put odds on it. No matter what happens, the city gets $126 million. That’s more for the city budget than the city gets” if the deal goes through, because of strings attached to the larger pot of money.
MIDCo is a consortium comprised of: New York’s Citi Infrastructure Investors; YVR Airport Services Limited of Vancouver and Boston-based John Hancock Life Insurance. YVR is jointly owned by Citi Infrastructure Investors and by the Vancouver Airport Authority.
In exchange for the massive up-front fee, MidCo would have pocketed airport revenues that topped $130 million in 2006, including parking, concessions, and passenger facility charges.
An estimated $1.15 billion of the proceeds would have been used to pay off Midway Airport debt. The deal also included: $225 million for police and fire protection; $126 million for soundproofing and Midway capital projects already underway and $19 million for transaction fees and legal expenses.
State law requires 90 percent of the $1 billion profit to be used to bankroll city infrastructure projects and shore up under-funded city employee pension funds.