Monorail Mulls Financing for Airport Extension

LAS VEGAS-Looking to solve its revenue problem, the Las Vegas Monorail Co. is gearing up to extend its reach to McCarran International Airport. A company official tells GlobeSt.com that it, monorail system operator Bombardier and investment bank Goldman Sachs are mulling several financing options, none of which would utilize taxpayer money, but could not be more specific at this time.

The lack of public subsidy is unusual for a public infrastructure project and, in the case of the 3.9-mile monorail route that has been servicing the Las Vegas Strip since 2004, less than successful. The monorail’s rider- and revenue-per-mile statistics are the highest in the nation but the revenue—while 30% higher than operational costs—hasn’t been enough to cover its debt service obligations.

Three tranches of debt were used to pay for 100% of the $650 million project. Two-thirds of that total came in the form of bonds held by Nevada’s Department of Business and Industry, which has it insured by Ambac Financial Group, a major financial guarantor. Earlier this year, Moody’s said the bonds could default in as soon as two years and concurrently cut the monorail company’s credit to from “B3″ to “Caa3″—aka “junk bond territory”—but kept the insurer’s “AAA” credit intact even as it and other bond insurers face trouble form the subprime mortgage sector.