v3.26.1
Note 10 - Bonds Payable, Loans Payable, and Interest
 6 Months Ended
Jun. 30, 2026
Notes to Financial Statements  
Debt Disclosure [Text Block]

10.

Bonds payable, Loans payable, and Interest

 

 

The following table summarizes the Company’s bonds and loans payable as of June 30, 2026 and December 31, 2025:

 

       
June 30, 2026
  

December 31, 2025

 
 

Maturity Dates

 Contractual Interest Rates  

Principal Amount

  

Carrying Value

  

Principal Amount

  Carrying Value 
Bonds payable:                     

Series 2021 Bonds

July 2036 - July 2054

  4.00 - 4.25%  $166,340  $162,909  $166,340  $162,815 

Series 2026 Bonds

Subject to Mandatory Tender January 2031  6.00%   150,000   146,858   -   - 
Total bonds payable      316,340   309,767   166,340   162,815 
                      
Loans payable and finance leases:                     
Term Loan FacilitySeptember 2030  80% of (SOFR + 0.1%) + 2.00%   69,796   69,796   -   - 
Yorkville Promissory Note 1June 2027  7.75%   15,000   14,726   15,000   14,430 
Yorkville Promissory Note 2June 2027  7.75%   10,000   9,795   -   - 
Vista LoanDecember 2035  Prime + 0.25%   6,021   5,917   6,090   5,980 
Equipment LoanAugust 2026  3.79%   2   2   9   9 
Finance LeasesAugust 2026 - July 2027  6.82%   96   96   125   125 
Total loans payable and finance leases      100,915   100,332   21,224   20,544 

Total bonds and loans payable

     $417,255  $410,099  $187,564  $183,359 

 

The Company’s contractual principal payments required under its bonds payable and loans payable as of  June 30, 2026 were as follows: 

 

Year Ending December 31,

 

Bonds Payable

  Loans Payable 

2026 (remainder of year)

 $-  $12,542 

2027

  -   12,591 

2028

  -   98 

2029

  -   105 

2030

  -   69,909 

Thereafter

  316,340   5,574 

Total

 $316,340  $100,819 

 

As of June 30, 2026 and  December 31, 2025, the fair value of the Company's Series 2021 Bonds was approximately $141.8 million and $140.8 million, respectively. As of June 30, 2026, the fair value of the Company's Series 2026 Bonds was approximately $155.3 million . The fair value of the Company's bonds is estimated utilizing Level 2 inputs including prices for the bonds on inactive markets. The Term Loan Facility and the Vista Loan bear interest at a floating rate based on an index plus a spread, and the Yorkville Promissory Notes carry short-term maturities. As such, the Company believes the carrying value of such debt approximates their respective fair value.

 

Interest Expense

 

The following table sets forth the details of interest expense:

 

  

Three months ended

  

Six months ended

 
  

June 30, 2026

  

June 30, 2025

  

June 30, 2026

  

June 30, 2025

 

Interest

 $5,040  $1,868  $8,729  $3,741 

Commitment fees

  227   -   489   - 

Accretion of bond premium and amortization of debt issuance costs

  758   49   1,443   98 

Total interest incurred

  6,025   1,917   10,661   3,839 

Less: capitalized interest

  (4,688)  (1,784)  (8,028)  (3,568)

Interest expense

 $1,337  $133  $2,633  $271 

 

The Company uses derivative financial instruments to manage its interest rate risk associated with its variable-rate term loan facility in an aggregate principal amount of up to $200 million (the “Term Loan Facility”) with JPMorgan Chase Bank, N.A. The Company does not enter into derivative transactions for speculative or trading purposes. In  October 2025, the Company entered into an interest rate swap (the “Swap Agreement”) for notional amounts of up to $200 million, based on predetermined notional schedule agreement as defined in the Swap Agreement. The Swap Agreement effectively fixes the SOFR component of any loans at or below the notional schedule made under the Term Loan Facility at approximately 2.65%, or 4.73% inclusive of applicable interest rate spreads, for the five-year term.

 

The following table reflects the fair value of the Swap Agreement as of June 30, 2026 and December 31, 2025:

 

Balance sheet location: June 30, 2026  December 31, 2025 
Asset derivatives:        
Accounts receivable, prepaid expenses, and other assets $5  $2 

 

The Swap Agreement is not designated as a hedging instrument. The Company records cash settlements and changes in fair value associated with the Swap Agreement as a component of interest expense within the consolidated statement of operations.

 

Tax-Exempt Series 2026 Bonds Issuance

 

On  February 12, 2026, Sky Harbour Capital III LLC (“Sky Capital III”), an indirect, wholly-owned subsidiary of the Company, completed a $150 million financing through the issuance of Revenue Bonds (Sky Harbour Capital III LLC Aviation Facilities Project), Series 2026 (the “Series 2026 Bonds”). The Series 2026 Bonds were issued by the Public Finance Authority of Wisconsin, a multi-jurisdictional conduit issuer (the “Issuer”), pursuant to a Trust Indenture, dated as of  January 1, 2026 (the “Indenture”) and effective as of  February 12, 2026, between the Issuer and UMB Bank, N.A., as trustee (the “Series 2026 Bond Trustee”). The proceeds of the Bonds were used to make a loan (the “Loan”) to Sky Capital III pursuant to a Loan Agreement, dated as of  February 1, 2026 (the “Loan Agreement”), between the Issuer and Sky Capital III, and assigned to the Series 2026 Bond Trustee. The Series 2026 Bonds were issued in a limited offering (the “Offering”) pursuant to a Limited Offering Memorandum dated  January 29, 2026 (the “Limited Offering Memorandum”) to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”) or accredited investors within the meaning of Rule 501(a) under the Securities Act. The borrowings under the Loan Agreement are guaranteed (the “Guarantee”) by Sky, and Sky Harbour Holdings IV LLC, a wholly owned subsidiary of Sky (the “Pledgor”). Pursuant to the Indenture, all of the Issuer’s right, title, and interest in the Loan Agreement (except for certain unassigned rights) were assigned to the Series 2026 Bond Trustee. The Series 2026 Bonds are secured by the Loan Agreement and the residual cash flows of certain of the Company’s projects, and payment of the Bonds is structurally subordinate to the Series 2021 Bonds and borrowings under the Term Loan Facility.

 

The Series 2026 Bonds and borrowings under the Loan Agreement bear interest at a rate of 6.00% per year, payable semi-annually in arrears on  January 1 and  July 1 of each year, beginning on  July 1, 2026. The Series 2026 Bonds are subject to mandatory tender for purchase on  January 1, 2031 (the “Mandatory Tender Date”), and will mature on  July 1, 2060, unless earlier exchanged, redeemed or repurchased. On the Mandatory Tender Date, holders will be required to tender their Bonds for purchase at a price equal to 100% of the principal amount thereof plus accrued interest. Following such mandatory tender, the Bonds  may be remarketed at a new interest rate or otherwise refinanced. Accordingly, although the Series 2026 Bonds have a stated final maturity of  July 1, 2060, Sky Capital III will be required to refinance or remarket the Series 2026 Bonds on or prior to  January 1, 2031.

 

The principal amount of the Loan is $150 million. The Company intends to use the proceeds from the Loan, together with other available funds, including draws from the Company’s Term Loan Facility, to (i) finance or refinance, directly or indirectly, all or a portion of the construction, equipping and/or improvement of all or a portion of certain aircraft storage facilities (collectively, the “2026 Projects”); (ii) fund a deposit to the debt service reserve fund for the Series 2026 Bonds; (iii) pay capitalized interest on the Loan through  January 1, 2029; and (iv) pay the costs of issuance of the Series 2026 Bonds.

 

The Series 2026 Bonds are subject to (a) optional redemption at the discretion of Sky Capital III at any time on or after  January 1, 2030 at a redemption price equal to the principal amount plus a 1% premium and accrued and unpaid interest to the redemption date, (b) mandatory redemption upon the occurrence of a determination of taxability of the Series 2026 Bonds, and (c) mandatory sinking fund redemption beginning in 2056.

 

Sky Capital III expects to meet its payment obligations under the Loan Agreement from funds to the extent available and permitted to be released under the master trust indenture with respect to the Series 2021 Bonds and the Term Loan Facility. Interest is capitalized through  January 1, 2029.

 

The Indenture and the Loan Agreement provide for customary events of default, all as described in the Indenture and the Loan Agreement.

 

Term Loan Facility 
 
First Amendment to Term Loan Facility

 

On  January 8, 2026, Sky Harbour Capital II LLC (“SH Capital II”), an indirect, wholly-owned subsidiary of the Company, entered into an amendment (the “Amendment”) to the Term Loan Facility. The Amendment amended the Term Loan Facility to provide for, among other things, conditions under which surplus funds, as defined in the Amendment (the “Term Loan Facility Surplus Funds”),  may be released to SH Capital II and its special purpose subsidiaries (the “Term Loan Borrowers”). 
 
In addition, Sky Harbour Holdings III LLC (“SKYH III”) amended its related guaranty (the “Sky III Guaranty”, and such amendment, the “Sky III Guaranty Amendment”) to provide for, among other things, conditions under which surplus funds arising from amounts received by Sky from excess revenues released from the Master Indenture may be utilized by Sky, as discussed below. 

 

Provided certain conditions within the Amendment are met, the Amendment permits the Term Loan Borrowers to distribute or otherwise transfer such Term Loan Facility Surplus Funds to (i) Sky (the “Parent Guarantor”) for the payment of general and administrative expenses of the Parent Guarantor, (ii) the payment of current interest or principal on indebtedness of the Parent Guarantor or indebtedness guaranteed by the Parent Guarantor, (iii) to deposit or transfer such funds into a separate account of an affiliate of the Parent Guarantor as security for the payment of principal of or interest on other indebtedness, or (iv) as a capital contribution of a Term Loan Borrower for the approved construction and operation of hangar project facilities at various airports (the “Portfolio II Projects”, and such restriction on distributions and transfers the “Permissible Uses”). The Amendment permits the release of the Term Loan Facility Surplus Funds beginning on the later of  January 1, 2027 or a trigger date based on substantial completion of certain Portfolio II Projects, and requires the Term Loan Borrowers to maintain (i) a historical debt service coverage ratio, and a (ii) projected debt service coverage ratio, in each case determined on the last day of each fiscal quarter of the Term Loan Borrowers, at a ratio of not less than 2.00 to 1.00.

 

The Sky III Guaranty Amendment permits the release of excess revenues released from the Master Trust on or after the later of (i)  January 1, 2027 and (ii) three (3) months after the Capitalized Interest End Date provided that (a) there are funds in excess of $800,000 on deposit in the accounts for such excess revenues on release date, and (b) to the extent there is a deficiency in any of the accounts associated with the Term Loan Facility, there are sufficient funds on deposit (in addition to the minimum amount of funds held pursuant to cover such  deficiency) and such funds are applied to remedy each such deficiency. The release of excess revenues is also subject to Permissible Uses.

 

The above release conditions are also subject to the customary condition that there not be any default under the Term Loan Facility.
 

 

Second Amendment to Term Loan Facility

 

On June 29, 2026, SH Capital II entered into an amendment (the “Second Amendment”) to the Term Loan Facility. The Second Amendment amends the Term Loan Facility to permit the Company to request a borrowing not to exceed $20 million under the Term Loan Facility (the “OPF Phase II Borrowing”) for the purpose of financing or reimbursing costs incurred by Sky Harbour Opa Locka Airport LLC (the “OPF Phase II Owner”) in connection with the second phase of its construction project at Miami-Opa Locka Executive Airport (the “OPF Phase II Project”). Under the terms of the Second Amendment, the OPF Phase II Project was not added to the borrowing base of the Term Loan Facility, nor did the OPF Phase II Owner become a Borrower. Subsequently, on June 29, 2026, SH Capital II requested and borrowed the OPF Phase II Borrowing of $20 million.

 

The Second Amendment requires that the Company make cash contributions to one or more of the Borrowers in an aggregate amount of not less than $20 million (the “Term Loan Facility Replenishment”) to fund eligible capital expenditures associated with the Portfolio II Projects. The Company is permitted to utilize the cash proceeds of the Series 2026 Bonds to fulfill the requirements of the Term Loan Facility Replenishment. Pursuant to the Second Amendment the Borrowers have agreed not to create or permit a lien on the Company's hangar campus at SJC or its equity interests therein, or income derived therefrom, until the Term Loan Facility Replenishment is complete.

 

The OPF Phase II Borrowing and the obligations under the Term Loan Facility Replenishment are also subject to the customary condition that there not be any default under the Term Loan Facility.

 

The Borrowers’ obligations with respect to the Term Loan Facility Replenishment have been guaranteed by the Company and by Sky Harbour Holdings II LLC.

 

Other Term Loan Facility Activity

 
On  January 8, 2026, subsidiaries of the Company that own existing and future hangar campuses at CMA and BDL were added to the borrowing base of the Term Loan Facility. Subsequently, on  January 8, 2026, SH Capital II drew funds of approximately $13 million under the Term Loan Facility in order to reimburse the Company for prior advances associated with capital expenditures at BDL and certain other general corporate purposes. 
 
On April 17, 2026, the subsidiary of the Company that owns a hangar campus at SLC was added to the borrowing base of the Term Loan Facility. Subsequently, the Company drew funds of approximately $14 million under the Term Loan Facility in order to reimburse the Parent for prior advances associated with capital expenditures at SLC and certain other general corporate purposes.
 
As of June 30, 2026, there was approximately $130.2 million of availability under the Term Loan Facility, subject to borrowing base restrictions.

 

2026 Yorkville Promissory Note

 

On  January 27, 2026, Sky issued a non-convertible, unsecured promissory note to YA II PN, Ltd., a Cayman Islands exempt limited company, or its registered assigns (“Yorkville”), in the aggregate principal amount of $10 million (the  “January 2026 Yorkville Promissory Note”). The issue price for the  January 2026 Yorkville Promissory Note was 100% of the aggregate principal amount thereof.

 

The  January 2026 Yorkville Promissory Note accrues interest at a rate of 7.75% per annum (or 18% upon the occurrence of an event of default) and matures on  June 8, 2027. Beginning on  July 8, 2026, and continuing on the same day of each of the twelve successive months thereafter, Sky shall repay a portion of the outstanding balance of the  January 2026 Yorkville Promissory Note in an amount equal to $833,333.33. The obligations of Sky under the  January 2026 Yorkville Promissory Note are guaranteed by the Company pursuant to a separate guaranty agreement between the Company and Yorkville. In connection with and pursuant to the  January 2026 Yorkville Promissory Note, the Company issued 40,000 shares of Class A Common Stock to Yorkville. The  January 2026 Yorkville Promissory Note contains customary representations and warranties by Sky and the Company and customary events of default. The proceeds of the  January 2026 Yorkville Promissory Note  may be used for working capital and general corporate purposes.