Auckland International Airport plans to sell up to $100 million of six-year bonds, replacing a note set to mature next week

A $100m bond which matures on October 17, paying annual of 5.47 per cent and is currently trading at a yield of 2.5 per cent. The new offer is for $75m with up to $25m in oversubscriptions, maturing in April 2023.

The 2023 bond will open with an indicative margin range of 0.82 per cent to 0.87 per cent per year, which at today's six-year swap rate of 2.88 per cent would see the airport operator pay annual interest of between 3.7 per cent and 3.75 per cent. The actual margin and interest rate will be announced on October 11 following the completion of the bookbuild.

The bonds are expected to be assigned a long-term credit rating of A- by Standard and Poor's, Auckland Airport said.

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In August, the airport said it may need balance sheet support toward the end of the 2018-2022 period as it implements a $1.9 billion infrastructure investment programme that includes a new runway by 2028.

As at June 30, Auckland Airport had about $2.1b of debt, of which around a third was in fixed-rate bonds, 11 per cent in floating bonds, 28 per cent in US private placement bonds and 8 per cent in Australian medium-term notes with the remainder made up of bank debt and commercial paper. In the year, decreasing cash rates and the successful refinancing of debt from historically higher rates helped reduce the average cost of funds to 4.46 per cent from 5.09 per cent in the previous financial year. It forecast that to rise to 4.52 per cent for 2018 to 2022.

The airport's other listed bonds include $100m at 4.73 per cent which matures in December 2019; $150m at 5.52 per cent which matures in May 2021; $100m and 4.28 per cent which matures November 2022; and $225m at 3.97 per cent which matures November 2023.

In the last financial year, the airport's annual profit rose 27 per cent to $332.9m with growth from domestic and international passengers. The company expects underlying profit for 2018 to be between $248m and $257m, which would deliver underlying earnings per share growth of up to 3.7 per cent compared with the 2017 financial year's underlying EPS of 20.8 cents, and would include the impact of its new aeronautical prices introduced in the financial year.

The shares last traded at $6.25, and have gained 31 per cent in the past 12 months.