The Hong Kong Airport Authority has raised US$4 billion to fund its third runway development in a four-tranche U.S. dollar debt deal, according to an official statement, as the city grapples with flight bans and cancellations amid COVID-19 curbs. It raised US$1 billion in a five-year green bond tranche, US$1.2 billion in a 10-year, US$1.2 billion in a 30-year and US$600 million in a 40-year issue, the airport authority said on Thursday (6 January).
Final prices were set at U.S. Treasuries plus 42.5 basis points (bps) for the five-year tranche, 80 bps for the 10-year, 120 bps points for the 30-year and 140 bps for the 40-year paper, it said. The prices were between 30 and 37.5 bps tighter than initial indications when the deal launched in Asia on Wednesday.
Raising the funds were significantly more expensive for the airport now compared with when it raised US$1.5 billion in 10- and 30-year debt in January last year at 65 and 80 bps above the Treasury benchmarks. Order books were open on Wednesday when Hong Kong announced fresh two-week flight bans for eight countries, including the United States, the UK and Australia as part of ongoing border restrictions.
The ban is expected to severely hit the airport’s passenger numbers but investors, especially in the longer-dated tranches, were mostly unperturbed, sources with direct knowledge told Reuters.
“We were concerned because it was an unexpected piece of news but we did not see any major negative impact from the accounts that had placed orders,” said one banker with direct knowledge who asked not to be identified as he was not permitted to speak to media.
Order books across the four tranches stood at US$11.5 billion, meaning the deal was almost four times oversubscribed, a term sheet seen by Reuters showed. The bonds were rated AA+ by ratings agency S&P.
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