Toronto Airport Eyes Bond Market Opportunistically as Notes Jump

(Bloomberg) -- Greater Toronto Airports Authority is monitoring bond market conditions as its most recent debt deal outperforms the wider Canadian dollar corporate bond market.

GTAA’s C$500 million ($382 million) of secured bonds due 2028 were quoted Friday at a spread of around 88 basis points over similar-duration government securities, or around 21 basis points tighter than where they were first sold Oct. 28, according to Bloomberg bid prices. The risk premium of Bloomberg Barclays Canada Aggregate Corporate Total Return Index tightened roughly 10 basis points over the same time period.

“We will continue looking at the market in case an opportunity arises,” GTAA’s Treasurer John Peellegoda said in an interview. That openness comes even though the company doesn’t have a significant maturity until September 2022, he said.

GTAA’s new bonds have rallied through uncertainly surrounding the presidential transition period in the U.S. and amid the potential impact from a fresh round of restrictions as governments grapple with a second wave of the coronavirus.

The Canadian government is kicking off discussions on providing financial support to airlines, airports and the aerospace sector which “could include loans and potentially other support,” Transport Minister Marc Garneau said in a Nov. 8 statement.

“The aid may be in the form of a certain grants that could help our P&L,” GTAA Chief Financial Officer Ian Clarke said. “We also need support to implement better ways to have testing protocols that don’t force visitors to spend a significant part of their stay in quarantine.”

The potential government aid package may include the postponement of some payments, said Clarke, who joined GTAA in 2017 after being the finance chief at Maple Leaf Sports & Entertainment, owner of the Toronto Raptors basketball team. The GTAA is seeking to extend a waiver for airport ground leases through 2022 from its current deadline next month, the firm said in its third-quarter results released last week.

On Nov. 3, Moody’s Investors Service confirmed the firm’s senior secured rating at Aa3, its fourth-highest investment-grade rating, citing its recent bond issue, which helped strengthen GTAA’s liquidity position. S&P Global Ratings also affirmed in June GTAA’s credit rating of A+ -- its fifth-highest investment grade -- even as it maintained a negative outlook on the company.

Moody’s said it expects GTAA’s passenger traffic this year to fall by around 75% compared to last year, and that passenger volumes are unlikely return to 2019 levels before 2024.

GTAA took several measures to protect its solvency in recent months, including obtaining covenant relief from bondholders in July. It also slashed its workforce by 27%.

“We have been detecting investor interest in our bonds since the summer” said Clarke, who doesn’t foresee any credit rating volatility. “It was good to be ahead of the U.S. elections,” in case there was any choppiness, he said.

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