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Auckland Airport sets 6-yr bond rate at 5.47%, cheers record-low swap rates

Friday 7th October 2011

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Auckland International Airport has taken advantage of near record-low swap rates to set the coupon on its new 6-year bonds at what may be the lowest ever for debt sold by the nation’s busiest gateway.

The airport company set the interest rate on its $100 million of six-year bonds at 5.47%, or a margin of 1.5 percentage points over the 6-year swap rate of 3.97%.

New Zealand swap rates reached all-time lows two days ago, with the 5-year rate touching 3.64%.

Bond rates have tumbled across the board amid speculation the global economy could slip back into recession as growth falters in the U.S. and Europe’s sovereign debt crisis threaten to stall growth in that region.

Mortgage rates are among the lowest in 45 years.

“It’s certainly a coupon that reflects the low interest-rate environment,” which reflects the global uncertainty, Simon Robertson, Auckland Airport’s chief financial officer, told BusinessDesk. “We’re very pleased with the outcome of the book build.”

The average coupon on the airport’s existing NZDX-listed bonds is 7.3%. Its November 2016 bonds have a coupon of 8%.

The airport will use the funds raised to refinance bank debt coming due next year. Robertson declined to say what the interest rate was on that debt.

The company has limited further need of funding at present, Robertson said.

Following the book build, the bond offer is to open on Oct. 10 and ends on Oct. 13. They are planned to trade on the NZDX market.

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