Terry McCrann: Wrong place at the wrong time for Sydney airport
Sydney Airport has some of the sweetest acreage in Australia but when passengers numbers have dwindled from 9 million in the March quarter to 400,000 in the June quarter, that doesn’t count for much, writes Terry McCrann.
Terry McCrann
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Sydney Airport found itself in exactly the wrong place at the wrong time.
Not wrong strictly geographically: even, maybe especially, in a post-virus world, it’s got some of the sweetest acreage in Australia.
But wrong virtually geographically – at the end of all those flight paths just when the planes stopped flying down them.
In the March quarter Sydney “welcomed” 9 million passengers; in the June quarter it “welcomed” just 400,000. It’s going to be a long time before it “welcomes” 9 million in a quarter again.
This poses a tough decision for its security holders, asked to pony up $2bn.
The instos had just two days to decide, Tuesday and Wednesday; retail investors get three weeks. They get to see what those instos decided, what happens to SAC’s security price in the market; and indeed what the market more broadly does.
The issue price builds in quite a bit of buffer against a fall in the market – whether general or SAC-specific – for SAC holders and even more a buffer for the underwriter UBS which has to pick up any stock not subscribed for.
SAC last closed at $5.39. Both instos and retail can subscribe at $4.56 – that’s a 13.2 per cent discount on the $5.26 (very) theoretical ex-entitlement price.
Judging on the way Qantas retail holders stayed away (wisely) in droves – just 5 per cent of Qantas retail holders subscribed for just $72m of the $500m they were offered, even though they were getting their shares at a 9c discount to the $3.65 the instos had paid – SAC retail might be a tad reluctant.
Wisely, as it took a 13c rise in the Qantas share price to get back to that $3.56 on Tuesday.
Qantas and SAC face different aspects of exactly the same disaster – fewer planes and passengers. SAC is basically a monopoly property trust but with essentially only one (significant) ‘tenant’, Qantas.
We will have to see whether it does get that second tenant – Virgin; but if it does it will be a much slimmed version.
SAC is raising its money via the desired – and now almost non-existent – renounceable issue. That means if you don’t subscribe (both instos and retail), the shortfall is auctioned off and the proceeds come back to the non-subscribing holders.
All will depend on what happens in the market over the next few weeks. And what happens with the virus.
Originally published as Terry McCrann: Wrong place at the wrong time for Sydney airport