Year-end spotlight: Chicago Midway’s bittersweet lesson

Granted, the lesson from the failed lease of Chicago’s Midway airport is more bitter than sweet but the sweet spot is still there.  John Schmidt, a partner at Mayer Brown and Chicago’s legal counsel on the transaction, put it best: “The basic Midway lesson is that it is in fact possible to privatise a major airport in the US. We were denied the climax, but it is possible.” 

Midway Airport

The climax was denied when MidCo, the consortium led by Citi Infrastructure Investors, failed to secure the financing needed to meet its $2.52 billion upfront fee. But the major US airport was almost leased for 99-years at a multiple of 28x earnings before interest, depreciation and amortization (EBITDA).

In the end, it is the bitter taste left by Midway’s failure that will write the deal’s epitaph.  Regardless of whether one chooses to blame the financial crisis for the deal’s collapse or take a more critical view on Citi’s approach to the transaction, a simple fact remains: to resurrect the deal in a politically viable way, Chicago would need a bid that matches or tops Citi’s price. Given the market conditions, few saw that as a possibility in 2009, though all throughout the year there was a consistent message from the city's quarters: we want to bring the deal back as soon as possible.

For comprehensive information on the Chicago Midway transaction in 2009, consult the archived InfrastructureInvestor coverage listed on the right.