Hong Kong airport raises over US$500 million in first local-currency bond offer

Airport Authority Hong Kong (AAHK), the operator of the city’s airport, has tapped the local public institutional bond market for the first time, pricing a HK$4 billion (US$512 million) senior offering to fund capital improvements including its third-runway project.

Investors from sovereign wealth funds, asset managers, corporations, banks and insurance companies poured into the sale, and the deal’s order book topped HK$11 billion from 57 accounts, AAHK said on Wednesday.

The coupon for the bond was set at 3.83 per cent, compared with the initial price guidance given to potential investors of 4.2 per cent, according to AAHK’s announcement.

“The overwhelming response from international investors to this landmark HKD deal, with an oversubscription rate of 2.75 times, has demonstrated the international market’s confidence in not only the AAHK and its business outlook, but also the HKD and the HKD capital market,” David Yim, head of capital markets for Greater China and North Asia at Standard Chartered, one of the coordinators of the issuance, said in a statement.

“We hope the success of this HKD issuance, indicating the depth of the HKD bond market, will encourage more issuers to tap the HKD bond market in public format.”

AAHK said it is diversifying its funding channels through the deal.

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“We are pleased with the overwhelming responses from investors,” said Jack So, chairman of AAHK. “The issuance diversified AAHK’s funding sources in the capital market with the most competitive financing costs.”

The airport authority is a frequent issuer of US dollar bonds, raising US$3 billion last year and US$4 billion in 2022. Last year’s sale was eight times oversubscribed, receiving US$26 billion in orders as travel resumed between Hong Kong and mainland China after three years of Covid-19 pandemic curbs.

“The Authority’s success reflects its increasing sophistication as a capital markets issuer, demonstrating its capability in navigating various markets and accessing the market that provides it the most competitive pricing for its target financing size,” said Alvin Yeo, executive director of debt capital markets at UBS.

“The success of the deal underscores the depth of liquidity in the Hong Kong dollar bond market for Hong Kong borrowers.”

The transaction comes amid a strong recovery in passenger traffic in Hong Kong, seen as one of the world’s most important financial and transport hubs.

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Banks accounted for 53 per cent of the commitments to the HKAA issuance, while fund managers and insurance companies picked up 30 per cent.

The joint global coordinators, joint bookrunners and joint lead managers are Bank of China, Citigroup, HSBC, Standard Chartered and UBS. The joint bookrunners and joint lead managers are ANZ, BNP Paribas, Crédit Agricole CIB, DBS Bank and Mizuho.

The deal was assigned an AA+ long-term issue rating by S&P and is expected to be issued on January 9.