Hong Kong's airport to issue US$4b bond deal to fund third runway expansion

[HONG KONG] Hong Kong's Airport Authority will issue a four-tranche US dollar bond to help raise funds for its third runway expansion, a term sheet showed on Wednesday.

It is hoping to raise US$4 billion, two sources with direct knowledge told Reuters on Monday when banks were mandated to work on the deal. The sources could not be named as the information had not yet been made public.

The deal comprises a 5-year green bond tranche, as well as 10, 30 and 40-year paper, the term sheet showed. All bonds are denominated in US dollars, it showed.

Hong Kong's airport authority declined to comment when contacted by Reuters.

The deal is shaping as a major test of investor sentiment towards Hong Kong's airport which has been hit by a huge number of flight cancellations due to the city's ongoing pandemic restrictions.

Order books were open Wednesday when Hong Kong announced new two week flight bans for eight countries, including the US, the UK and Australia as part of ongoing border restrictions.

Final price guidance has been set at US Treasuries plus 42.5 basis points for the 5-year tranche, 80 basis points for the 10-year, 120 basis points for the 30-year and 140 basis points for the 40-year paper, according to the term sheet.

Guidance to investors was delivered ahead of the US trading session Wednesday and was between 30 and 37.5 basis points tighter than initial indications earlier in the Asian time zones.

The funding is likely to be signifincantly more expensive for the airport which raised US$1.5b in ten and 30 year debt in January last year at 65 and 80 basis points above the Treasury benchmarks.

Final pricing is due to be set later on Wednesday, the term sheet said.

The authority last year reported a US$564.21million loss for the 2020-2021 financial year ended March, according to the most recent publicly available numbers.

REUTERS