Kingston
Airport Revenue Finance Limited’s bond offer has been upsized from US$440 million to US$480 million ($75.44 billion) after international investors rushed to buy into the offer less than a week after its announcement.

According to a post on
Bloomberg, “Kingston Airport Revenue (KINAIR) finally came with its long-awaited 12-year bond, pricing US$480 million at 6.75 per cent, upsizing from the initially reported US$440 million and low 7 per cent IPT (initial price talk). Allocations were very tight, with a book well over US$2 billion and bonds were heavily in demand in the grey market with bids as high as FRO plus 1.5 points.”

The bond, which was initially priced at US$99.969, was being quoted at US$101.75 – US$102.25 with a 6.47 per cent yield to maturity.

The
Bloomberg snapshot noted that Citi was the sole bookrunner and the offer should settle on October 2, 2024, under T+5 (trade day plus five business days). The bond will have its first amortisation period on June 15, 2026, and will have an 80 per cent balloon at maturity. The weighted average life (WAL) of the bond is 11.5 years.

Kingston Airport Revenue Finance Limited (King Air) is a Cayman-based special purpose vehicle (SPV) which will be assigned the Airports Authority of Jamaica’s (AAJ) economic right to receive 53.22 per cent of the gross revenues of Norman Manley International Airport (NMIA). King Air would use its portion of NMIA’s revenue to service the senior secured bond which will have a 6.75 per cent interest rate and mature on December 15, 2036.

The proceeds of the bond will be used to pay transaction fees and expenses, fund a six-month debt service reserve account and revenue account and for King Air to make a one-time payment to AAJ for the true sale of revenue rights. The Government of Jamaica will also use some of the proceeds to pay principal and interest on certain outstanding debt obligations and fund other budgetary purposes such as the $40-billion Shared Prosperity Through Accelerated Improvement to our Road Network (SPARK) programme.

S&P Global Ratings gave Kingston Airport Revenue Finance LLC an initial/preliminary credit rating of BB with a stable outlook, a notch above Jamaica’s own sovereign credit rating of BB–. Even Moody’s Ratings gave King Air a Ba3 rating with a stable outlook which is above Jamaica’s own credit rating of B1 with a positive outlook.

The AAJ owns both NMIA and Sangster International Airport which are operated by Mexico’s Grupo Aeroportuario del Pacífico, SAB de CV (Pacific Airport Group) under separate concession agreements. AAJ collects a monthly concession fee from GAP’s management of both airports which totalled $8.20 billion for the 2022/2023 fiscal year, with an estimated $9.28 billion collected for the 2023/2024 fiscal year.

AAJ collected US$41.3 million (MX$733.60 million) or $6.34 billion in concession fees during 2023 from PAC Kingston Airport Limited (PACKAL), a GAP subsidiary that operates NMIA, and US$34.7 million (MX$697.5 million) during 2022. This transaction with Kingston Airport Revenue Finance is an example of a securitisation transaction which allows for GOJ to secure financing from the capital markets on future revenue flows from an infrastructure asset. It doesn’t add any new debt to GOJ’s debt stock, but allows for it to use those proceeds to address key budgetary items such as repairing the country’s roads.