The Airport Authority Hong Kong (AAHK) on June 5 priced its largest bond transaction amounting to US$4 billion in four tranches that included its first-ever green bond, which raised greenwashing concerns from a Paris-based environmental NGO.
The net proceeds from the green bond will be used mainly to finance or refinance the eligible green projects under AAHK's sustainable finance framework such as green buildings, including third runway T2 concourse, sky bridge and HKIA Tower 2, clean transportation and energy efficiency projects.
The NGO Reclaim Finance says the third runway project raises serious climate and biodiversity-related risks, especially for the threatened Chinese white dolphins. It says that in addition to its climate impact, the project threatens the last Chinese white dolphins left in Hong Kong waters. Also called pink dolphins, the species, says Reclaim Finance, is threatened with extinction. It is one of the several marine species that will see their habitat destroyed, aloing with the water, noise and air pollution caused by the project.
But amid the greenwashing concerns, global investors piled into the deal as it attracted a combined final order book of US$11.2 billion across four traches, and in the process achieved tighter pricing.
The Reg S/144A deal consisted of a five-year green bond amounting to US$1 billion, which attracted global ESG investors across various regions. It is priced at 99.506% with a coupon of 1.75% and re-offer yield of 1.854%. This is equivalent to a spread of 42.5bp over the US treasuries, which is in line with the final price guidance and 37.5bp tighter than the initial price range of 80bp area.
The second tranche is a 10-year bond amounting to US$1.2 billion, which is priced at 99.921% with a coupon of 2.50% to offer a yield of 2.509%. This represents a spread of 80bp over the US treasuries, which is also in line with the final price guidance and 30bp lower than the initial price guidance of 110bp.
The third tranche is a 30-year bond amounting to US$1.2 billion, which is priced at 99.052% with a coupon of 3.25% and a re-offer yield of 3.30%. This is equivalent to a spread of 120bp over the US treasuries, which is likewise in line with the final price guidance and 25bp inside of the initial price range of 145bp area.
The final tranche is a 40-year bond amounting to US$600 million, which is priced at par with a similar coupon and re-offer yield of 3.50%. This represents a spread of 140bp over the US treasuries, which is also in line with the final price guidance and 30bp tighter than the initial price range of 170bp area.
Strong demand
AAHK previously accessed the US dollar bond market in January 2021 with a dual-tranche issuance comprising of US$900 million for 10 years and US$600 million for 30 years.
Out of the US$11.2 billion final order book, the five-year green bond generated US$3.3 billion worth of demand from 130 accounts. In terms of geographical distribution, 73% of the bonds were sold in Asia, 16% in the US and 11% in EMEA. Banks accounted for 44% of the bonds, while fund managers, insurance companies and corporates took 34%. The remaining 21% was bought by official institutions, while 1% was taken by private banks.
The 10-year tranche garnered an order book in excess of US$3.6 billion from 180 investors, while the 30-year bond generated orders worth US$2.8 billion from 150 accounts. The 40-year bond attracted a total demand of US$1.5 billion from over 110 accounts.
The net proceeds from the conventional tranches are earmarked to finance AAHK’s capital expenditures, including those for the third runway system project, as well as for general corporate purposes.
BofA Securities, BNP Paribas, HSBC, J.P. Morgan, Standard Chartered and UBS are the joint global coordinators for the transaction, as well as joint bookrunners and lead managers along with ANZ, Bank of China, Barclays, Citi, Credit Suisse, Mizuho Securities and Morgan Stanley.
BofA Securities, BNP Paribas, HSBC and UBS are the joint sustainability structuring advisers, while ANZ, Bank of China, Citi, J.P. Morgan and Standard Chartered are the joint associate sustainability structuring advisers.
Sustainalytics is the second-party opinion provider, while the Hong Kong Quality Assurance Agency issued the green and sustainable finance certification scheme pre-issuance stage certificate.
