The continuing weak travel demand impacting the Hong Kong International Airport (HKIA) due to Covid-19 did not discourage investors in supporting the latest fund raising of Airport Authority Hong Kong (AAHK), which priced on January 28 a dual-tranche bond offering totalling US$1.5 billion.
The Reg S/144A deal consisted of a 10-year bond amounting to US$900 million, which was priced at 99.140% with a coupon of 1.625% and a re-offer yield of 1.719%. This was equivalent to a spread of 65bp over the US treasuries, which was in line with the final price guidance and 35bp tighter than the initial price range of 100bp area. The yield was the lowest ever achieved by AAHK.
The other tranche was a 30-year bond amounting to US$600 million, which was priced at 99.711% with a coupon of 2.625% to offer a yield of 2.639%. This is the longest dated US dollar bond issued by AAHK and the final pricing represented a spread of 80bp over the US treasuries, which was also in line with the final price guidance and 40bp inside the initial price guidance of 120bp area.
This is AAHK’s first deal in 144A format, allowing the company to further diversify its investor base, which historically consisted of Asian and European investors, to include US onshore domestic accounts as well.
The offering attracted a combined order book of US$8.5 billion, with the 10-year tranche generating US$4.4 billion from 188 accounts. In terms of geographic distribution, 58% of the bonds were sold in Asia, 33% in the United States and 9% in EMEA. By type of investors, fund managers accounted for 50%, banks 28%, central banks and sovereign wealth funds 13%, insurance companies and pension funds 7% and other investors 2%.
Three-runway system
The 30-year bonds garnered demand amounting to US$4.1 billion from 167 investors, with 63% of the paper distributed in Asia, 32% in the US and 5% in EMEA. This trade was also driven by fund managers, which bought 65% of the bonds, insurance companies and pension funds 24%, central banks and sovereign wealth funds 5%, banks 4% and other investors 2%.
The proceeds from the notes will be used to fund the AAHK’s capital expenditure, including the capital spending of the Three-runway System project (3RS) and for general corporate purposes.
Commenting on the bond offering, AAHK chairman Jack So says: “The solid market response is a testament to the strength and resilience of the AAHK’s credit profile as well as HKIA’s role as an international aviation hub.”
The issuance was AAHK’s second foray in the US dollar bond market in two months, having printed on December 1 2020 a dual-tranche perpetual capital securities totalling US$1.5 billion. This was first US dollar senior perpetual offering in the public bond market from an airport globally with the proceeds also earmarked for 3RS.
The construction of the 3RS commenced in August 2016. The 650-hectare reclamation is substantially complete. The construction of the 3RS targets completion in 2024 at a total budgeted capital expenditure of HK$141.5 billion (US$18.26 billion) in money-of-the-day terms.
BofA Securities, HSBC, Standard Chartered and UBS were the joint global coordinators for the latest bond transaction, as well as joint bookrunners and lead managers along with BOC International, Citi, Deutsche Bank and Mizuho Securities.
