Cathay Pacific passenger airplanes are seen parked on the tarmac as a Cathay Pacific Cargo plane, bottom, takes off at Hong Kong International Airport in Hong Kong, April 24, 2020. (ANTHONY WALLACE / AFP)
HONG KONG – Airport Authority Hong Kong announced on Thursday that it will issue a $4 billion four-tranche US dollar bond to help raise funds for its third runway expansion.
The deal comprises a 5-year green bond tranche, as well as 10-, 30- and 40-year paper and all bonds are denominated in US dollars, the authority said in a press release.
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.
The deal comprises a 5-year green bond tranche, as well as 10-, 30- and 40-year paper and all bonds are denominated in US dollars, Airport Authority Hong Kong said in a press release
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.
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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 release.
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.
Chairman of the authority Jack So Chak-kwong was quoted as saying in the release that "we are very pleased with the overwhelming responses from investors around the world, making this bond offering the largest US dollar bond issuance from a Hong Kong issuer since 2003."
The launch of the 40-year tranche is a solid testament to the support for Hong Kong International Airport’s long-term development as well as the solid credit profile of Airport Authority Hong Kong, said So in the release.
The funding is likely to be signifincantly more expensive for the airport which raised $1.5 billion in ten and 30 year debt in January last year at 65 and 80 basis points above the Treasury benchmarks.
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The authority last year reported a HK$4.4 billion ($564.21 million) loss for the 2020-2021 financial year ended March, according to the most recent publicly available numbers.