H.K. Sells One of Biggest Airport Bonds Amid Virus, Travel Curbs

(Bloomberg) -- Hong Kong's Airport Authority sold one of the industry's biggest dollar bonds to help fund its expansion with a third runway, even as the city faces renewed travel curbs amid the threat of the highly contagious omicron strain. 

The airport operator priced the $4 billion four-part notes with maturities stretching from five to 40 years. The offering received orders totaling more than $11.2 billion, with the two shorter tenors garnering more demand than their longer-dated counterparts. 

The debt sale was seen as a test of investor confidence in Hong Kong's goal to remain a major international aviation hub, even as the pandemic has thrown the industry globally into one of its worst crises ever. It also came as the local authorities imposed strict virus-control measures for the first time in almost a year, including the suspension of flights from eight countries, sticking to a Covid Zero policy that has left the city largely cut off from the world.

Hong Kong International Airport carried about 1.2 million passengers last year, according to the provisional figures on its website. That's slumped from about 8.8 million in 2020, which was already down sharply from 71.5 million in 2019. The city's Chief Executive Officer Carrie Lam said last year that the Asian financial center can retain its status as an international hub, as construction of the 3,800-meter runway will help boost the airport's competitiveness.

Compared with its previous dollar-debt offerings, the weaker demand for the authority's latest bond can be attributed to the bigger issue size and concerns about the fast-spreading omicron variant, according to Bloomberg Intelligence analyst Sharon Chen.

Recent bond offerings from airports around the world offer some points for comparison, even though the broader global credit market has been stung by rising concerns about inflation since those deals were priced, making it harder for many borrowers to win stronger demand.

Calgary Airport Authority's six-part C$2.075 billion ($1.6 billion) notes in October received orders for between three and 6.5 times the issue size. South Korea's Incheon International Airport Corp. took bids for more than six times its $300 million bond in April. 

The Hong Kong authority's $1.5 billion dual-part bond in January last year received orders of more than five times that amount, while a two-part perpetual note of an identical size in December 2020 got bids totaling nearly 10 times.

NOTE: Click here for a list of dollar offerings by global airports.

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