Investors climbed into Auckland International Airport's capital raising with the institutional placement attracting bids over and above the $1 billion sought - but major shareholder Auckland Council did not participate.
That decision, confirmed by Mayor Phil Goff, will likely to see the council's ownership in the utility fall to 18 per cent.
Goff then highlighted in an interview with RNZ that the council would not back away from a planned 3.5 per cent rates increase, announced last year, because of the Covid-19 pandemic.
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Unlike central Government, the council did not have a lot of capacity to borrow more money for much-needed capital expenditure, he said.
Goff was asked if the council would take part in the airport's capital raising.
"We have a limit on what we can borrow," he said. "We have got huge demands on our capital investment and infrastructure, so what that will mean is that our shareholding in Auckland Airport will drop from maybe 20 per cent to 18 per cent," he said.
The company's last annual report puts council ownership at just under 22 per cent.
"The truth of the matter with Auckland International Airport Ltd is that they have no revenue at the moment," he said.
"They have done what they have had to do to maintain solvency and to be able to come through this intact.
"Will shareholders take a haircut on that? Of course they will - but that's the nature of the world we are living in, and it's no good crying about it," he said.
Auckland Airport went into a trading halt yesterday while it undertook the $1 billion placement component of its capital raising.
The company said bids came in well in excess of the $1 billion total offer amount from existing institutional and other select investors in both local and offshore markets.
Chief Executive Adrian Littlewood said he was very pleased with the level of support from investors, which would help to strengthen Auckland Airport's balance sheet during this period of strict border controls and significantly reduced passenger numbers.
A $200 million share purchase plan is expected to follow the placement.
Auckland Airport shares rallied by 31 cents or 6.2 per cent, $5.35 when the stock came off a trading halt in the afternoon session.
Last week, the stock had been very weak in anticipation of a capital raising taking place.
Harbour Asset Management portfolio manager Shane Solly said the offer was "clearly well supported".
"It's a phenomenal result for New Zealand Inc and for Auckland Airport," he said.
"To achieve this kind of support from foreign and domestic institutions really is quite outstanding," he said.
While the council had seen its investment diluted, it remained the airport's biggest single investor by far.
"When you take a three or five-year view, people may look back at this as being great opportunity to invest in what will remain a fantastic asset," Solly said.
The placement was fully underwritten and was conducted under an auction-style international "book-build" where institutions put in bids.
Auckland Airport said the fundraising would reinforce its balance sheet to ensure that it remained well capitalised during the period of strict border controls and significantly reduced passenger numbers arising from the Covid-19 pandemic.
Under the SPP, individual shareholders will be able to subscribe for up to $50,000 worth of new shares.
The company said the funds raised are expected to be sufficient to meet all operating, investing and financing cash flow obligations.
The placement was underwritten at a floor price of $4.50 per share, representing a discount of 10.7 per cent to the last closing price of $5.04 per share on Friday.
Wade Gardiner, an analyst at Craigs Investment Partners, has adjusted his forecasts for a scenario where borders remain closed for 12 months (compared to six months previously), followed by a slower passenger recovery.
After factoring in revised passenger estimates, rent relief on both its property portfolio and retail concessions Gardiner's revised FY21 Ebitda for the airport falls from $310m to $73m.
With funding risk now off the table the analyst has revised his target price to $5.33 (from $4.70), and retained a "Hold" recommendation.