Auckland Airport seeks up to $100m in new six-year bond

Auckland International Airport plans to sell up to $100 million of six-year bonds, replacing a note set to mature next week

A $100 million bond which matures on Oct. 17, paying annual of 5.47 percent and is currently trading at a yield of 2.5 percent. The new offer is for $75 million with up to $25 million in oversubscriptions, maturing in April 2023.

The 2023 bond will open with an indicative margin range of 0.82 percent to 0.87 percent per year, which at today's six-year swap rate of 2.88 percent would see the airport operator pay annual interest of between 3.7 percent and 3.75 percent. The actual margin and interest rate will be announced on Oct. 11 following the completion of the bookbuild.

The bonds are expected to be assigned a long-term credit rating of A- by Standard and Poor's, Auckland Airport said.

In August, the airport said it may need balance sheet support toward the end of the 2018-2022 period as it implements a $1.9 billion infrastructure investment programme that includes a new runway by 2028.

As at June 30, Auckland Airport had about $2.1 billion of debt, of which around a third was in fixed-rate bonds, 11 percent in floating bonds, 28 percent in US private placement bonds and 8 percent in Australian medium-term notes with the remainder made up of bank debt and commercial paper. In the year, decreasing cash rates and the successful refinancing of debt from historically higher rates helped reduce the average cost of funds to 4.46 percent from 5.09 percent in the previous financial year. It forecast that to rise to 4.52 percent for 2018 to 2022.

The airport's other listed bonds include $100 million at 4.73 percent which matures in December 2019; $150 million at 5.52 percent which matures in May 2021; $100 million and 4.28 percent which matures November 2022; and $225 million at 3.97 percent which matures November 2023.

In the last financial year, the airport's annual profit rose 27 percent to $332.9 million with growth from domestic and international passengers. The company expects underlying profit for 2018 to be between $248 million and $257 million, which would deliver underlying earnings per share growth of up to 3.7 percent compared with the 2017 financial year's underlying EPS of 20.8 cents, and would include the impact of its new aeronautical prices introduced in the financial year.

The shares last traded at $6.25, and have gained 31 percent in the past 12 months.

(BusinessDesk)