Investing in the High Yield Municipal Market: How to Profit from the Current Municipal Credit Crisis and Earn Attractive Tax-Exempt Interest Income

Fallen Angel: Denver International Airport

Denver International Airport (DIA) broke its all-time traffic record in 2010, as 52 million travelers went through the distinctive tentlike terminals of one of the world’s most efficient and technologically advanced air travel facilities. It was named the third best airport in North America for 2011. Its bond ratings were reaffirmed by all three rating agencies when it came to market with its latest refunding bond issue in October 2011: A1 by Moody’s and A+ by both S&P and Fitch. Who would have thought that this well-established airport used to be one of the most controversial “high yield” issuers in the tax-exempt market and that its very existence was subject to doubt just 16 years ago? In many ways, the investment saga of DIA, dating back to the early 1990s, is the perfect illustration for the concept of the life cycle of a high yield credit, discussed at great length in Chapter 3.

DIA started out in 1989 as just another public mega-project, designed to replace the old Stapleton Airport, which had been open since 1929. It initially benefited from extremely strong political support, led by Federico Peña, Denver’s mayor at the time, and a coalition of local business, union, and media leaders, concerned with the city’s declining tax base and anxious to create a new catalyst for job creation and economic growth. Stapleton was reportedly plagued by a number of problems, including inadequate separation between runways, leading to extremely ...