Hong Kong Airport Authority Sells Record HK$18.5 Billion in Local Currency Bonds
The Airport Authority of Hong Kong has sold HK$18.5 billion (S$3.3 billion) in bonds in the largest-ever issuance in the financial hub’s local currency, despite a sluggish recovery in the aviation sector and delays to the airport’s expansion plan.
Bond Issuance Details
The Hong Kong government’s statutory body priced three-year, five-year, 10-year, and 30-year notes yielding 4.05%, 4.1%, 4.25%, and 4.5%, respectively, late on Tuesday (Jan 7). The notes received HK$25.3 billion of bids, all from Asia, according to a source familiar with the matter.
Record-Breaking Issuance
The Hong Kong dollar issuance is the largest of its kind, surpassing the HK$18 billion convertible-bond offering by now-liquidated developer China Evergrande Group in 2018, according to Bloomberg-compiled data.
Proceeds Allocation
Proceeds of the bond will be used for refinancing and funding capital expenditures, including the airport’s three-runway project and general corporate purposes, according to the source.
Aviation Sector Challenges
The city’s flagship airline, Cathay Pacific Airways, is not yet back to full strength, and the airport is struggling to appeal to major foreign airlines. A broader airport upgrade that cost the government US$18 billion has been delayed until at least the end of 2025. Additionally, the airport’s three-runway system came into operation at the end of November, but there will be little additional flight capacity available for at least another year.
Dim Sum Notes and USD Notes
Hong Kong Airport Authority has also priced 10-year and 30-year dim sum notes totalling 3.2 billion yuan (S$596 million). It started marketing US dollar notes of 3.5, 5.5, and 10-year on Wednesday morning.
Conclusion
The record-breaking bond issuance by the Airport Authority of Hong Kong is a significant step in funding its capital expenditures and refinancing needs. However, the airport’s challenges in the aviation sector, including the delayed expansion plan, may affect its ability to fully utilize the proceeds.
FAQs
Q: What is the size of the bond issuance by the Airport Authority of Hong Kong?
A: The bond issuance is HK$18.5 billion (S$3.3 billion), the largest-ever issuance in the financial hub’s local currency.
Q: What is the yield on the notes?
A: The notes yield 4.05%, 4.1%, 4.25%, and 4.5% for three-year, five-year, 10-year, and 30-year notes, respectively.
Q: What is the purpose of the bond proceeds?
A: The proceeds will be used for refinancing and funding capital expenditures, including the airport’s three-runway project and general corporate purposes.
Q: What are the challenges facing the airport’s aviation sector?
A: The city’s flagship airline, Cathay Pacific Airways, is not yet back to full strength, and the airport is struggling to appeal to major foreign airlines. A broader airport upgrade has been delayed, and the three-runway system will not provide additional flight capacity for at least another year.
