Auckland International Airport Ltd launched a $1.2 billion capital-raising yesterday – a $1 billion fully underwritten placement and a $200 million share purchase plan.
Chief executive Adrian Littlewood said that, following the placement, Auckland Airport would hold pro forma adjusted liquidity of $1.258 million as at 31 March, including $340 million of cash on hand & $485 million of committed undrawn bank facilities.
The placement has been underwritten at a floor price of $4.50/share, representing a 10.7% discount to the last close price of $5.04 last Friday, a 12.6% discount to the $5.15 5-day volume-weighted average price – and less than half the price at the shares’ peak of $9.85 last June.
The share purchase plan will enable eligible existing New Zealand & Australian shareholders to subscribe for up to $NZ50,000/$A47,000 of new shares at the lower of the placement share price or a 2.5% discount to the 5-day volume weighted average price.
The company expects to send a share purchase plan booklet out on Thursday and will close applications on Friday 24 April.
Trading in the company’s shares was halted until market opening tomorrow at the latest.
Over the period to 31 December 2021, the equity raising, debt renegotiations & operating response would give Auckland Airport the ability to:
- cover operating costs & capital expenditure
- cover one-off costs from the suspension or cancellation of various capex projects, and
- provide flexibility to manage current debt facilities, including capital markets debt due to mature before 31 December 2021, totalling $567 million (including $175 million of US private placement notes).
While the pandemic conditions continue, the company also aims to cut operating costs by 35%.
Company chair Patrick Strange said: “Auckland Airport has moved swiftly to respond to the abrupt changes in the market and our first priority has been to ensure the ongoing safety & security of our operation.
“The outbreak of Covid-19 has changed travel & trade markets virtually overnight and, like many organisations, our business has been materially impacted. Auckland Airport will have a critical role to play in New Zealand’s long-term recovery, and we need to act now to secure our future.”
Mr Strange said the company’s banking group had provided covenant waivers & extensions to all bank facilities due to mature before 31 December 2021.
He said Auckland Airport remained committed to completing a number of infrastructure projects focused on essential safety, asset replacement, maintenance & resiliency, including the planned runway pavement replacement.
Cost-saving measures include:
- suspending discretionary spending
- reviewing work underway with external consultants
- reducing the number of external contractors supporting the business & capital programme
- cutting board & executive remuneration by 20%
- cutting most employees’ pay to 80% & a 4-day working week
- suspending bonuses & short-term incentives for the financial year
- reducing operations in line with the new operating environment, and
- suspending or cancelling capacity-driven capital expenditure.
Company was about to accelerate infrastructure spend
Mr Littlewood said the outbreak of Covid-19 had hit just as the company was accelerating one of the country’s largest private infrastructure investment programmes, designed to accommodate projected growth in passenger numbers beyond the 21 million who passed through the airport in the last financial year.
“This has been our team’s shared ambition – to deliver the critical aeronautical infrastructure New Zealand needs to support growth in travel, trade & tourism. Over the past 12 months we have made excellent progress, beginning construction on 3 key anchor infrastructure developments, while other projects such as the domestic jet hub were just about to kick off.
“While our long-term plans remain the same and we still are optimistic about the long-term outlook for passenger growth, our near-term projections no longer hold true.”
The company has suspended or cancelled capital expenditure projects with an estimated completed project value in excess of $2 billion, but still expects to spend about $275 million on capital projects from now until the end of 2021, focusing on essential safety, asset replacement, maintenance & resiliency (including the planned runway pavement replacement), and finishing projects sufficiently close to completion.
Banks extend facilities, company to seek same from US noteholders
Mr Littlewood said the company’s bankers had extended all facilities maturing up to the end of 2021 and provided covenant waivers for potential breaches resulting from the adverse operating environment associated with the impact of Covid-19, also through to the end of 2021.
He said Auckland Airport would also seek covenant waivers from existing US private placement (USPP) noteholders in the near term. The current gross outstanding balance of Auckland Airport’s USPP note programme as at 31 March was $702 million, excluding expected derivative gains of $285 million if the USPP notes were to be repaid.
Despite the calamity arising from the pandemic, Mr Littlewood said the airport company should emerge flexible & strong: “A focus on cost reduction initiatives, increased financial flexibility & a strong pipeline of aeronautical & non-aeronautical opportunities position Auckland Airport for a return to growth as part of a Covid-19 recovery in New Zealand & globally.”
Later story: $1 billion airport share placement fully subscribed
27 March 2020: Airport defers $2 billion of projects
18 March 2020: Air NZ halt share trading, Auckland Airport suspends guidance
Attribution: Company release.