Bradley International Airport App B

APPENDIX B

Summary of Selected Bond Covenants

The covenants detailed in the various indentures are among other things intended to outline acceptable operational and management policies and procedures. Selected covenants relating to the operation of the airport are summarized below.

The state shall charge and collect fees for services and use of facilities that provide sufficient gross operating revenues to pay bond obligations as they come due and to create and maintain reserve funds.
The state shall from time to time engage an independent airport consultant to review and make recommendations concerning the development, operation, maintenance, and management of the airport including changes in fees charged for services and use of the facilities.
The state shall promptly acquire, construct, restore, and equip all of the properties for which the cost is to be paid from the proceeds of the bond issuances.
The state shall maintain the airport, or cause the airport to be maintained in good operating condition in conformity with standards customarily followed by the aviation industry for airports of similar size and character.
The state shall operate and maintain the airport, or cause it to be operated and maintained, at standards required in order for the airport to be approved by federal authorities.
The state shall operate and maintain the airport as a revenue-producing enterprise, or cause it to be operated and maintained as a revenue-producing enterprise, in order to assure the airport shall be self-sufficient and self-sustaining.
The state shall not consent to any amendments to operating agreements or concession agreements, or enter into any new agreements that would impair or diminish the security and payment of the bonds.
The state shall comply with terms of grants-in-aid of the federal government and, if not in conflict with such terms, apply the grant-in-aid funds to (1) pay the costs of improvements not yet paid; (2) reimburse any fund from which money was advanced to pay for a purpose for which the grant-in-aid could be used; (3) redeem or repurchase bonds; or (4) any other lawful purpose.
The state shall employ, or caused to be employed, competent supervisory personnel for the operation and management of the airport.
The state shall not sell, lease, sublease, or otherwise dispose of all, or substantially all, of the properties constituting the airport, without simultaneously depositing cash or governmental obligations in an amount sufficient to meet current and future obligations of all outstanding bonds.
The state may execute leases, licenses, and other agreements pertaining to airport properties in connection with the normal and customary business operations provided no such agreements impair or diminish the payment of outstanding bond obligations.
The state may issue additional bonds to finance new airport projects provided a independent certified public accountant and an independent aviation consultant have determined gross operating revenues will be sufficient to meet the payment obligations of both the existing and new bonds.
The state shall provide the bond insurer with a copy of each operating budget, a copy of each annual audit, the official statement prepared in connection with the issuance of additional debt, notice of any draw on the reserve account, notice of any bond redemptions, and at the request of the bond insurer annual traffic data, number and names of airlines maintaining maintenance facilities at the airport, landing fee and rental rates, and other information as may reasonably be requested.

The covenants cited are focused on assuring bond obligations will be met. They do not appear to impose any unusual restrictions on the operation or management structure of the airport. Nor do the requirements directly preclude the airport from engaging in alternative operational practices or management structures.

Of course, the covenants are subject to interpretation. It would seem the primary criterion for screening the legitimacy of changes to Bradley's operations and management structure would be the certainty with which any new arrangement would continue to assure airport revenues would be sufficient to meet current and future bond obligations. If such actions are contemplated, legal experts and the Trustee should be consulted prior to any major changes being made. However, it takes the consent of no less than 60 percent of the bonds outstanding to change or add to any of the covenants detailed in the Indenture.

Financial requirements. The indentures designate an Airport Revenue Fund as the account for the deposit of all rentals, fees, charges, and other revenues received by the airport. The indentures also identify a series of sub-accounts and an order of priority for the funding the accounts from the airport's operating revenues. Requirements for the amount of money to be transferred monthly from the Airport Revenue Fund to each sub-account and the purpose for which the funds could be expended were outlined as well.

The table below lists the sub-accounts in the order of their priority for receiving funds and the type of expenditures authorized for each account. The table shows priority is given to assuring obligations to bond holders can met.


Financial Accounts Established by the Bond Indentures
*Account or Fund:*	*Authorized Expenditures*
Bond Service Account: An amount equal to one-twelfth of the principal of each bond that will come due within the next twelve months, times the number of months since the last installment¸ plus one-sixth the interest that will come due times the number of months since the last installment.	Payment of principal and interest on outstanding bonds.
Reserve Account: An amount equal to the principal and interest requirements for the current or succeeding year for all bonds outstanding.	Payment of principal and interest in the event of a deficiency in the Bond Service Account.
State of Connecticut: An amount equal to the budgeted operating expenses for the next two months.	Payment of current expenses.
Operations and Maintenance Reserve Account: An amount equal to 25 percent of the budgeted operations and maintenance expenses for the current fiscal year.	Payment of current expenses whenever there are insufficient funds for such purpose.
Note Payment Fund: One-twelfth of the amount necessary to make the balance equal to 25 percent of the sum budgeted to pay the principal and interest of any notes payable in the current fiscal year.	Payment of principal and interest on any notes issued.
Improvement Fund: An amount designated by the State Bond Commission.	Payment of costs of any additions, expansions, or improvements.
Airport Coverage Fund: An amount equal to 25 percent of the sum required in the fiscal year to pay the interest on the notes and bonds and the principal of the bonds as they come due.	Transfer to the Redemption, Bond Service, Improvement accounts, or any authorized airport purpose
General Airport Fund: The balance remaining after making the required distributions above.	Transfer to the Redemption, Bond Service, Improvement, Note Repayment accounts, or any authorized airport purpose
As part of the 1992 refinancing of the 1982 bonds there was established a Subordinated Debt Service Fund. The fund currently consisting of the four sub-accounts. The sub-accounts are funded through withdrawals from the General Airport Fund, which are distributed in the order and amounts listed below.
Subordinated Bond Service Account: An amount equal to the principal and interest payments due on the date due	Payment of the principal and interest due on outstanding bonds
Subordinated Redemption Account: An amount equal to the amortization payments due on the date due.	Payment of amortization on outstanding bonds.
Subordinated Reserve Account: An amount equal to the principal and interest requirements for the current or succeeding year for all outstanding bonds.	Payment of principal and interest
Subordinated General Account: The balance remaining after making the required distributions above.	Any authorized purpose
Source: Bond Indentures of Trust Statements of 1982 and 1989; Bradley Airport Financial Statements, DiSanto & Bertoline Company.

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