Sydney Airport raises $US900m to cut debt

Sydney Airport has completed a $US900 million ($1.17bn) bond raising to help reduce its debt levels.

Moody’s has praised Sydney Airport’s strong market position and stable earnings margins.

Aviation: Sydney Airport has completed a $US900 million ($1.17 billion) bond raising to help reduce its debt levels.

The airport completed the raising on Friday after enlisting JPMorgan, Bank of America Merrill Lynch, ANZ and ScotiaBank earlier this month.

That group of banks also helped the airport raise $US500m a year ago.

The 10-year bonds were given a provisional rating of Baa2 by ratings agency Moody’s and have been priced with a coupon of 3.625 per cent, according to Bloomberg.

Moody’s said the rating reflected Sydney Airport’s strong market position and stable earnings margins.

“These features underpin the airport’s earnings stability and therefore enable it to sustain fin­ancial leverage higher than its similarly rated Australian peers,” said Moody’s vice-president and senior analyst Spencer Ng. “The airport’s credit profile also benefits from the absence of a large capital expenditure program, because such a situation supports strong free cash flow generation. While these cash flows are currently distributed to shareholders after meeting debt servicing obligations, they provide management with the flexibility to reduce debt, should the operating environment materially decline.”

The raising came as Sydney Airport continued to benefit from its high share of the international passenger market that had insulated it from the ongoing softness in the domestic passenger market.

The airport saw 39.7 million passengers through its doors last year, with international traffic up 4.3 per cent and domestic up 2.3 per cent as Chinese arrivals increased 17.8 per cent over the year and Filipino visitors surged by 36.7 per cent.

“International passengers gen­erate around four times more revenue than domestic passengers, a situation that, coupled with ongoing solid international passenger growth of around 3 per cent, underpins the airport’s revenue,” Mr Ng said.

Moody’s noted that Sydney Airport’s capital structure could change, depending on its role in the proposed Western Sydney Airport, but it expected it to manage that risk appropriately.