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Airservices Australia

Matthew Macreadie

Investors looking for quasi-government risk, should look no further than Airservices Australia. The new Airservices Australia bond issue provides a lower-risk option with an enhanced government bond return for a AAA asset.

– The 6-year bond issue priced at a coupon of 5.4% or a spread of ACGB Nov-28 +167bps.
– The 10-year bond issue priced at a coupon of 6% or a spread of ACGB Nov-32 +197bps.

In relative value terms, the 6- and 10-year securities are pricing with a spread equivalent to somewhere between a A/AA grade asset.

Airservices Australia - Trade Idea

Airservices Australia is rated AAA (by S&P) and is a government-owned organisation established by the Air Services Act 1995. The company is Australia’s monopoly provider of air traffic management and aviation rescue fire fighting services, operating at 29 major airports and managing 11% of the worlds airspace. Airservices Australia’s assets are located at 1,079 sites around Australia with a combined book value of AUD2,591m.

Source: Airservices Australia Investor Presentation

As the world transitions to living with COVID-19 and borders re-open, the industry’s operating environment and recovery have entered a new phase. The government provided assistance of AUD1,132m in FY21 (on top of AUD250m provided in FY20) to help manage growing debt and fund key services. Further assistance in the form of a AUD495m equity investment was announced in the Federal Budget in May 2022.

Relative Value

Source: Bloomberg