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Hong Kong airport’s US$1.5 billion bond oversold by 10 times as investors clamour to bet on post Covid-19 travel recovery

  • Perpetual securities diversify funding during pandemic without diluting government equity ownership
  • Investors’ demand for the highly rated debt issue peaked at over US$15 billion

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Airport Authority Hong Kong, which operates the city’s airport, on Wednesday launched the first ever US-dollar perpetual bond by an airport globally. Photo: EPA-EFE

Airport Authority Hong Kong (AAHK), the operator of the city’s airport, said on Wednesday that it has raised US$1.5 billion by selling perpetual debt to help fund the completion of its mega third-runway project.

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Investors from sovereign wealth funds to insurance companies clamoured to participate in the sale and the deal’s order book peaked at over US$15 billion. In the end, 280 investors across Asia and Europe took part in the transaction, driven by the belief that the pandemic is a temporary event and that Hong Kong is well-placed as a hub within the Greater Bay Area to benefit from the eventual rebound in travel.

“We are very pleased with the overwhelming response from the global investor community, which is a testimony to the market’s confidence in Hong Kong International Airport’s business recovery when the pandemic subsides,” said Jack So Chak-kwong, AAHK’s chairman in a statement.

The coronavirus pandemic has hammered passenger traffic through Hong Kong International Airport because of continued stringent travel restrictions and quarantine measures. Analysts expect numbers to drop more than 85 per cent this year from 2019’s levels.
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The AAHK’s debt sale took the form of US-dollar perpetual debt, a first for an airport globally. Perpetual bonds are not redeemable and pay a steady stream of interest forever.

Hong Kong’s government owns AAHK, bolstering investors’ confidence that if AAHK were to struggle to sustain interest payments it would likely be bailed out. The AAHK plays a key role in maintaining Hong Kong as an aviation hub.

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