UBS secures lead manager, underwriter role in Sydney Airport raising

Sydney International Airport. Picture: Monique Harmer

Investment bank UBS has pulled off a coup by securing the role of sole lead manager and underwriter for the $2 billion equity raising by Sydney Airport.

Sources say the lucrative mandate was won after UBS earlier embarked on an extensive amount of work on Western Sydney Airport, being developed at Badgerys Creek.

Sydney Airport was considering an acquisition of the airport in the city’s west.

The thinking is that the mandate was payback for that work and with a fee believed to be at 1.35 per cent of the entitlement offer, UBS stands to make about $27m from the transaction, at least.

The raise was well covered early on Tuesday at the $4.56 per share offer price, a 15.4 per cent discount to the last traded price of $5.39.

Shareholders will receive one share for every 5.15 owned.

Sydney Airport previously counted Macquarie as its bank, given that the Australian listed finanical previously controlled the asset.

It is understood that other banks had offered to carry out the raise at a skinnier discount.

However, it is believed that the trade-off by the company for securing a steeper discount was that UBS offered to embark on the transaction without formally testing market interest by wall-crossing investors.

This could have caused the share price to fall before the raise.

It was also one of the first renounceable offers this year in what creates more risk for the bank.

Shares in Sydney Airport had drifted lower since July, amid anticipation of an equity raising.

A raising was tipped by DataRoom as early as April when Auckland International Airport went cash in hand to investors for $1.17bn.

This was after the stock initially crashed in March at the onset of COVID-19, after hitting $9 earlier this year.

With soundings, some estimate that the equity raising could have been executed at a discount of about 8 per cent to the last closing share price on a renounceable basis, where investors could trade their rights to participate.

One aspect of the deal that has grabbed plenty of attention is that advising Sydney Airport is Adara Partners, of which former UBS Australia and New Zealand boss Matthew Grounds is a panel member.

Mr Grounds had earlier been working to set up a boutique investment bank with former UBS executive Guy Fowler, who is also linked to Adara, with suggestions that there were plans to poach staff from their former employer.

However, that move has been suspended for the time being.

One thought is that Mr Grounds and Mr Fowler may have had some input in seeing UBS gain the role to provide something of a peace offering to their former employer.

The raise comes after Sydney Airport on Tuesday announced a $53.6m net half year net loss, after passenger numbers plunged by 57 per cent.