Airports Company South Africa (Acsa), which runs the country’s nine main airports, is reaping the benefits of an expansion completed ahead of the 2010 soccer World Cup that is boosting profit and enabling it to buy back debt.
The extra yield investors demand to hold state-controlled Acsa’s 11.68 percent rand bonds due in April 2023 rather than similar-maturity government debt has narrowed 70 basis points in the past year to 139 basis points on Monday.
That compares with a 9 basis-point increase in the premium for electricity utility Eskom.
Yields on Acsa’s 10-year bonds have climbed 37 basis points in the past 12 months to 9.59 percent, compared with the 145 basis-point rise for average yields in the JP Morgan Chase CEMBI transport index.
“Acsa had massive capital requirements leading up to the World Cup in 2010, which resulted in it issuing its existing bonds,” Jana Kershaw, a credit analyst at Ashburton Investments, said yesterday. “That increased its debt levels quite a bit. Now it is making money and its debt has stabilised, which is positive for the bonds.”
Acsa spent R17 billion revamping airports before the World Cup.
Projects included the construction of a new Durban airport and the expansion of passenger terminals in Cape Town and Johannesburg.
Net income probably almost doubled to about R360 million in the year to March from a year earlier, Tebogo Mekgoe, the company’s general manager, said earlier this year.
Acsa’s favourable cash position enabled it to cut its debt to R14.8bn by March 31, from R16.7bn a year before, the transport ministry, which oversees Acsa, said in a reply to a parliamentary question last week.
The company had redeemed a R1.2bn bond in the past financial year that was due in February next year and repaid a R1.3bn loan nine years earlier than planned.
Last month Acsa redeemed a further R500m worth of bonds that were to mature in October next year. The government owns 74.6 percent of Acsa, while the Public Investment Corporation has 20 percent. Private investors hold the rest.
While Acsa is repaying debt, other state companies are increasing borrowing to fund expansion. Eskom estimates it needs to raise R250bn in the five years through 2018, while transport company Transnet puts its funding requirements at R87.7bn through fiscal 2019. – Bloomberg