Jul 4, 2018
Vancouver airport eyes Canadian bond market to fund $9.1B expansion
, Bloomberg News
The Vancouver Airport Authority plans to access the domestic bond market next year to help finance its $9.1 billion expansion.
The Canadian airport is looking to boost Vancouver’s position as an international hub by completing 75 projects over the next two decades, which includes expanding the terminal, setting up new parking spaces and improving car rental facilities. It expects to increase the number of passengers to 32 million in 2022 from a record 24.2 million last year.
“There’s likely going to be some financing in 2019 coming up,” Diana Vuong, who took over as chief financial officer this month, said in an interview. “We think the Canadian market will be able to meet our financing needs.”
The authority has sold six bonds in Canadian dollars, with sizes ranging from $150 million to $200 million. Three of them are still outstanding, with the nearest maturity coming due in December on $200 million sold as 12-year bonds in 2006.
“We are in the midst of planning for what we’re going to do with that,” she said. When asked whether the authority will refinance the bonds and raise more funds for its expansion plans, she said “we are working with our advisers on what is the optimal amount and evaluating the market conditions at the time.”
Financing Plan
Vuong also said the authority has a “quite flexible” financing plan and had a cash balance of $208 million at the end of last year. Its primary source of funding comes from its profits, which get reinvested. The Vancouver airport, like all major air transport hubs in Canada, is owned by the federal government through Transport Canada and locally operated as a non-profit.
Canadian corporate spreads have widened out in recent months after tightening to a decade low in January. The average spread was 109 basis points, up 21 basis points from the January low, according to a Bloomberg Barclays index that covers $350 billion of corporate bonds in Canadian dollars. With a 0.6 per cent return this year, Canadian corporate bonds are heading for the worst performance since 2008.