By Roger J Kerr
It is very hard not to compare the latest corporate bond offering from Auckland International Airport to the earlier deal of their largest customer, Air New Zealand.
The new issue pricing comparison stacks up as follows:-
- Air New Zealand (BBB- equivalent) paid 5-year swap plus 2.80% margin in early September and were swamped with investor demand.
- Auckland International Airport (A-) paying 6 year swap plus 1.50% margin.
At the time I thought Air New Zealand were paying too much for their money, it looks like Auckland Airport have seen that strong investor demand and priced their margin below what most would have expected for an 'A-' credit.
I think Auckland Airport will get their money no problem; however the 1.50% margin they can command in the local market is a long way below the 2.00% benchmark pricing for 'A-' corporate bonds in the Australian and international credit markets.
In addition to the higher credit rating, Auckland International Airport’s credit standing as a secure infrastructure monopoly allows it to get away with issuing at 0.50% below the wholesale market benchmark.
The pricing achieved by Auckland International Airport may make other potential corporate bond issuers sit up and take notice that the local market offers a very competitive alternative to bank and USPP market debt raising/pricing.
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* Roger J Kerr runs Asia Pacific Risk Management. He specialises in fixed interest securities and is a commentator on economics and markets. More commentary and useful information on fixed interest investing can be found at rogeradvice.com
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