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Smith's Research & Gradings
Volume: 
XXVIII
Issue: 
19
Author: 
November 2, 2020

Smith's Research & Gradings

Transportation: Can't Get There From Here

Transportation: Can't Get There From Here

If you want to get a feel for municipal transportation credit, watch REM's video "Can't Get There From Here" which was filmed at a drive-in movie theater in Georgia in 2010. It's available on YouTube and the video is, well, "poor quality."

Brightline West Breaks Its Pick?
The $2.4 bln. Brightline West deal was pulled from the calendar after weeks of attempts to market the bonds.  Fortress Investment Group is backing the Brightline West deal, which would build a high speed rail line from Los Angeles to Las Vegas.

Nuveen, which is the largest owner of the Brightline East bond offering, was heard to resist the initial offering of the Brightline West deal.  However, Morgan Stanley was able to strike a deal to do a tender offer for the Brightline East bonds at par (currently quoted at a price of 85), which went a long way to getting Nuveen comfortable with the new deal.  

However, even with Nuveen as a big dog, the deal ran into tough sledding given it was a massive $3.4 bln. offering. Morgan Stanley cut the par amount to $2.2 bln.

A major buyer was working late last Friday to get a large order. But, the buyer wanted  more equity in the deal. Morgan Stanley was able to get the equity raised to $500 mln., but it still wasn't enough, according to sources.    

Hilltop Sees Slow Rebound For Airlines
Hilltop Securities published a report, "The Slow Rebound of Air Travel Summary."

Thomas Kozlik, director of research and first-team All-Star Analyst, said, "A little over one million travelers flew on Sunday, Oct. 18, according to TSA checkpoint data, marking the first time since the COVID-19 crisis began that TSA traveler data surpassed one million passengers, but activity remains about 40% of last year."

Passenger activity slowed at the end of October 2020, but it also decelerated at the end of October 2019. This could be seasonal and not related to a third COVID-19 wave.

Airline travel is expected to return in phases. Regional and domestic business travel will return first, according to a McKinsey analysis. But a long recovery is expected for corporate travel as the name of the McKinsey report indicates, "For Corporate Travel, a Long Recovery Ahead." The United Airlines CEO predicted that business travel would not be back to normal until 2024.

There has been a slow rebound of airline travel since the depths of April and May of 2020. The 1 million passengers on Oct. 18 compares with over 2.6 million travelers on the same day in 2019.

A little over one million travelers flew on Sunday, Oct. 18, according to TSA checkpoint data, marking the first time since the COVID-19 crisis began that TSA traveler data surpassed one million passengers, but activity remains about 40% of last year.

Mr. Kozlik is watching closely to see if the slow rebound of airline travel is being threatened. On Halloween, Saturday, Oct. 31, 2020, he saw travel numbers hit a low we have not seen since September 2002 when TSA reported only 618k travelers. But, it is important to note that there was a similar drop-off on Halloween 2019 to 1.8 million passengers relative to the week before. So, the drop-off this year may not necessarily be a result of the development of a third wave of COVID-19 cases nationally, but a seasonal occurrence.

There has not been an individual day that has surpassed one million travelers since October 18. On Sunday, Oct. 25, the number fell to 983k and seven days later, Nov. 1, only 936k travelers boarded planes, according to TSA data. "However, we are seeing that there was a similar drop-off in airline activity in 2019 in the weeks after middle of October as well. Again, this 2019 decline could be an indicator of seasonal activity. Therefore, we will be watching closely in the coming weeks to see if airline activity falls below what we would describe as seasonal trends. If activity does fall, then it could very well mean that the third wave of COVID infections is beginning to impact traveler movement," Mr. Kozlik said.

Take notice

Stay on top of the latest global news that can impact your investment strategy.

Beirut’s Agony: Ports, Food, and China

On August 4th the port of Beirut was the scene of a horrific explosion, which killed more than 150 people, injured 6,000 and left some 300,000 homeless. The damages are estimated to be in excess of $15 billion. The city’s hospitals, already struggling due to the COVID-19 pandemic, were damaged by the blast and swamped with injured. On top of already raging economic and political crises, the explosion now raises the question of food security. Prior to the explosion, 80 percent of Lebanon’s imports passed through Beirut’s port. Without a functioning port in Beirut, the country now relies on a handful of secondary ports, chief among them being Tripoli in the north, to import food and to export its products.

Silver Line and Purple Line Problems Underscore Challenges to Economic Development Plans

Economic development related to transportation in and around Washington, D.C. underscores the tremendous limitations and challenges facing the area.

Outlook Neutral

Delta Air Lines, Inc — LaGuardia Airport Terminals C&D Redevelopment Project

In voting conducted by institutional investors, The 2018 All-Star Deal of the Year was awarded to the New York Transportation Development Corporation for the Delta Airlines, Inc - LaGuardia Airport Terminals C&D Redevelopment Project.

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