Airport company signs $400m bond deal

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Perth Airport has become the latest in a collection of infrastructure companies that have sought to diversify their debt through Australian debt capital markets, raising hopes of improving activity in the sector.

Perth Airport Pty Ltd, a subsidiary of Perth Airport Development Group which operates and maintains Perth Airport, issued $400 million bonds due 2021 in a deal that was arranged by National Australia Bank and Westpac Banking Corporation.

Top-tier firm Allens acted on the deal and was led by partner James Darcy, head of the firm’s debt capital markets division.

Darcy said that the deal shows rising confidence in the Australian debt capital market among infrastructure companies falling in the BBB- to BBB+ ratings range.

“Since the decline of the monolines, Australian infrastructure assets have predominantly been funded through shorter term bank debt. We are now seeing increasing activity from single asset infrastructure companies seeking diversification in the domestic bond market as well as offshore capital markets,” Darcy said.

He added that another noticeable trend in the domestic bond market is the availability of seven-year debt for infrastructure companies.

“Infrastructure companies are clearly interested in obtaining longer term tenor to better match the longer term nature of their asset base. We have seen an increase in seven-year bond issuances over the past year, and in many ways seven has become the new five in terms of tenor. The question is whether the domestic market can stretch out to tenors of 10 years and beyond, something many in the market would be keen to see.”

Other recent bonds issuances by Australian infrastructure entities include AMT Management (operator of the Eastern Distributor road in Sydney), ConnectEast (operator of EastLink road in Melbourne) and port operator Adani Abbott Point.