Bond investors send US$4b show of support to airport

Hong Kong's airport authority has raised US$4 billion (HK$31.2 billion) to fund its third runway development in a four-tranche US dollar debt deal, one of which was 2.3 times oversubscribed.

It raised US$1 billion in a five-year green bond tranche, US$1.2 billion in a 10-year, US$1.2 billion in a 30-year and US$600 million in a 40-year issue, the Airport Authority said yesterday, the biggest US-dollar bond issue since 2003.

Final prices were set at US Treasuries plus 42.5 basis points for the five-year tranche, 80 bps for the 10-year, 120 bps points for the 30-year and 140 bps for the 40-year paper, it said.

The prices were between 30 and 37.5 bps tighter than initial indications when the deal launched in Asia on Wednesday.

Raising the funds were significantly more expensive for the airport now compared with when it raised US$1.5 billion in 10- and 30-year debt in January last year at 65 and 80 bps above the Treasury benchmarks.

Order books were open on Wednesday when Hong Kong announced fresh two-week flight bans for eight countries, including the United States, the UK and Australia as part of ongoing border restrictions.

The 40-year tranche breaks the record and marks the longest tenor ever issued by a Hong Kong issuer in benchmark US dollar bond offering, while the five-year tranche is the first green bond issued by AAHK after it recently announced its sustainable finance framework, said David Yim, head of Capital Markets in Greater China and North Asia at Standard Chartered.

However, the green bond has sparked concerns about "greenwashing" by a Paris-based climate campaign group days ago.

In a statement released on January 4, Reclaim Finance said it denounced the banks' participation and called on investors not to participate in the deal to avoid greenwashing and reputational risks.

The three-runway project is part of the expansion plans of the Hong Kong International Airport which started in 2016 and should be fully completed in 2024. According to Airport Tracker, the airport emits as much annually as three coal plants combined, said the statement.

"The issuance of a green bond for such a devastating project might have been cleared for takeoff but the biodiversity and climate risks associated with the project speak for themselves: labelling this project as green is pure high-flying greenwashing," said Lucie Pinson, director of Reclaim Finance.