Fanny Doucet, Director, Debt Capital Markets and Sustainable Finance, Clare Lewis, Director, Debt Capital Markets, Australia, and Maeve McLaughlin, Managing Director, US Debt Capital Markets, discuss how Scotiabank helped Sydney Airport take off in the USPP market and land coveted deal recognition from FinanceAsia and KangaNews.
FinanceAsia recently awarded the coveted ‘Best Sustainable Deal (Corporate) in 2020’ to Sydney Airport’s AUD$600 million US Private Placement (“USPP”) issuance. In addition, KangaNews has awarded the transaction the ‘Australasian-Origin US Private Placement Deal of the Year’. Scotiabank acted as Joint Lead Agent on the innovative debt capital markets offering with first-ever ESG features.
Scotiabank was an ideal partner for Sydney Airport for this transaction, with the Bank’s debt capital market teams in Australia and North America having extensive credentials in the USPP market, complemented by experience with Australian infrastructure and airport borrowers, and expertise in ESG-related transactions.
‘First flight’ in ESG-linked USPP market
With tenors ranging from 15 to 30 years, and tranches in the Australian, US and Euro currencies, the February 2020 transaction won FinanceAsia’s attention, as it featured the first-ever ESG-linked tranche in the USPP market. It included a unique variable coupon rate that reflects Sydney Airport’s dedication to meeting sustainable operations targets. This was also the first time in any global bond market that the coupon has the potential to move both up and down based on the borrowers’ performance.
The KangaNews award is also highly sought after and is a reflection of the strong support the innovative transaction received from the market. The transaction was more than four times oversubscribed from its initial launch volume of AUD$300 million senior secured notes and ascended steeply to print AUD$600 million, pricing inside the tight end of guidance. This followed a roadshow in the U.S. and client calls to update existing investors on the issuance and attract potential new investors.
While it is among the oldest airports in the world, Sydney Airport has grown into one of the largest travel hubs in Asia-Pacific. Sydney Airport has also become a highly sought-after borrower in global markets, in light of its strong fundamentals, diversified revenues and high-quality credit ratings in the infrastructure sector, notes Clare Lewis, Director, Debt Capital Markets in Sydney.
Pointing to Scotiabank’s decade-long connection with the airport in support of their lending, derivative and debt capital markets needs, Lewis is pleased the Bank earned this recent mandate on such an important transaction: “It speaks to both our deep relationship with the issuer and our strong presence in the USPP market, helping Australian corporates access this market with on-the-ground intelligence and advice from our New York desk.”
Michael Momdjian, GM Treasury, Tax & Insurance at Sydney Airport, notes that the long-standing relationship with Scotiabank is highly valued, observing that “it is important for us to have relationship banks with strong DCM capabilities to assist with our regular issuance program. The USPP market in particular is an important source of long-term funding from investors with a good understanding of the strengths of our business and credit."
“We regularly provide Sydney Airport with feedback and market insights to help them assess the USPP market. We have the pulse of investor sentiment with our track record in previous transactions in the Australian infrastructure sector,” says Maeve McLaughlin, Managing Director, US Debt Capital Markets in New York. Scotiabank has led the majority of USPP offerings for Australian airport operators over the past two years, including Sydney Airport, Melbourne Airport and two issuances for Perth Airport.
Fanny Doucet, Director, Debt Capital Markets and Sustainable Finance in Toronto, explains that in 2019, Scotiabank committed to mobilize C$100 billion by 2025 to help clients and the Bank transition to a low-carbon economy and it has since established a dedicated Sustainable Finance Group to drive innovative client solutions, in collaboration with teams across Scotiabank’s Global Banking and Markets division. Over the past several years, Scotiabank has led landmark sustainable bond and lending transactions.
In 2019 the Bank participated in Sydney Airport’s sustainability-linked loan, which had a very similar structure to that ultimately executed in their recent USPP offering. Specifically, the 20-year, AUD$100 million tranche of the USPP offering provides the issuer with a potential path to either a lower or higher coupon rate, depending on their ability to satisfy a designated ESG risk rating from Sustainalytics.
Reflecting on the success of Sydney Airport’s USPP transaction and the accolades received from FinanceAsia and KangaNews, Clare Lewis notes that, “Scotiabank’s DCM business is built on our ability to assist our issuer clients to access North American capital markets and on the relationships we’ve developed. With our in-depth industry, USPP and ESG strengths, we are increasingly appreciated and rewarded by the world’s top issuers and investors.”
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