Wellington International Airport, the Infratil-controlled capital city gateway, raised $70 million through a bond offer, falling short of its target and with the bulk winding up with one investor.
The airport operator sought $75m from the bond issue with the capacity to accept oversubscriptions of up to $25m for the notes which mature on June 16, 2025, paying annual interest of 5 per cent. At the time of the offer, Wellington Airport negotiated a side deal with an institutional investor who had planned to subscribe to $50m of unlisted wholesale bonds but instead subscribed to the retail offer for the same amount.
As part of that deal, Wellington Airport said it won't exercise a call option on the bonds without the institutional investor's consent and agreed to lift the coupon by 1 percentage point if the airport operator's credit rating falls to BB+ or lower. Standard & Poor's currently rates the airport's credit a BBB+ with a 'stable' outlook.
When the offer opened on December 15, the bond's 5 per cent coupon was 163 basis points above the eight-year swap rate, and that gap has now widened to 170 basis points with the rate at 3.3 per cent.
ANZ was the sole manager of the latest offer, whereas the airport's previous retail bond issues had joint managers including Forsyth Barr, First NZ Capital and Westpac.
Low interest rates helped renew the attraction of the NZX's debt market for companies to raise funds last year, and the airport tapped that market two other times in 2016. It currently has four bonds listed on the NZX, and the latest offer will be allotted on Friday.
Those bonds include one $75m tranche paying 6.25 per cent maturing in May 2021 and another $75m tranche paying 4.25 per cent and maturing in May 2023, some $60m of notes paying 4 per cent and maturing in August 2024, and $59.1m of debt paying 5 per cent and coming due in June 2025.
Wellington Airport has been upgrading facilities, spending $73m on a new domestic passenger terminal and upgrading its international terminal. Majority owner Infratil recently said it expects $90m of capital expenditure in the current financial year, funded by recent bond issues, to improve passenger terminal services, a ground transport hub including 1,000 car parks, and a 134-room hotel.
The airport has also been advocating for an extension to its runway to make room for long-haul flights from Asia and the US. Infratil has been pushing for central and local government to foot most of the $350m price tag, saying the project wasn't commercially viable on a standalone basis, but that the wider regional economy would be a beneficiary if it went ahead. The runway debate has attracted opposition from some quarters, which is expected to play out during Environment Court hearings in June.
As at September 30, the airport had $350m of bonds outstanding, including wholesale notes, and largely undrawn banking facilities of $100m.