SAN FRANCISCO (February 28, 2013) – In a first of its kind public-private partnership, Morrison & Foerster represented a consortium of major airlines in the privatization of the Luis Muñoz Marín International Airport in San Juan, Puerto Rico. The deal closed yesterday, following Federal Aviation Administration approval. Aerostar Airport Holdings, a joint venture between Highstar Capital and Grupo Aeroportuario del Sureste SAB de CV will pay the Government of Puerto Rico over $2.5 billion to operate the airport ($615 paid yesterday, and the balance over time.)
Morrison & Foerster partner Zane Gresham represented the major airlines serving San Juan, Puerto Rico – American, Delta, Jet Blue, Southwest, United-Continental, US Airways, UPS and FedEx – in negotiating the transaction with the Government of Puerto Rico and Aerostar, and securing FAA approval. The closing initiates a 40-year lease to Aerostar to finance, operate, maintain and improve Luis Muñoz Marín International Airport as well as 15-year Use Agreements with the airlines. This is the first major US airport to use a privatization model following the 1996 law establishing the FAA's Pilot Privatization Program. A similar move was attempted for Chicago's Midway airport in 2009, but was dashed in the wake of the U.S. financial crisis. A renewed effort is underway at Midway.
"This is pioneering effort, one that will encourage other governments to revisit this method to finance and develop important infrastructure. Under the right conditions, it is an excellent model to fund infrastructure improvements," said Mr. Gresham.
Changes in Puerto Rico's political climate further complicated the deal. When the deal was announced in July 2012, it was backed by then governor Luis Fortuño. Last fall Puerto Ricans elected Alejandro García Padilla over then-Gov Fortuño. The new governor and his party were openly skeptical of Puerto Rico's Public-Private Partnerships Authority, and the airport privatization. Thus, even when the FAA issued its Record of Decision on Monday, the Puerto Rican government did not act immediately.
"It's been a controversial topic for the administration," Mr. Gresham said. "But the governor in an excellent speech concluded that Puerto Rico should honor the agreement made by the prior administration, and accept the deal which will support government finances, and make the Luis Muñoz Marín Airport globally competitive."
"This was a remarkably complex and challenging transaction, and required ingenuity and cooperation by all the parties and their counsel," according to Mr. Gresham. Additional legal advisors on the deal included Richard S. Lincer and Adam Brenneman from Cleary Gottlieb, Kenneth Quinn from Pillsbury, and José A. Sosa-Lloréns from Fiddler, González & Rodríguez representing Aerostar; John R. Schmidt and Jeromy S. Cannon from Mayer Brown, and Manuel Rodríguez Boissen from Pietrantoni, Mendez & Alvarez representing the Government of Puerto Rico.