Istanbul’s second-biggest airport, sporting the fastest passenger growth in Europe, is weighing its first bond sale as it seeks more than a 25 percent increase in travelers this year.
Sabiha Gokcen International, owned by Malaysia Airports Holdings Bhd. and Limak Yatirim of Turkey, is leaning toward selling $500 million of securities to refinance debt, and is considering maturities between five and 10 years, Chief Executive Officer Gokhan Bugday said in an interview this week. Bank loans could be an alternative, he said.
Bugday, who scrapped a bond sale in the first half of 2013, said he expects the airport to increase traffic to 24 million passengers this year from almost 19 million in 2013. Debt sold by Turk Telekomunikasyon AS last month, the nation’s first non- bank issue this year, got bids for eight times the amount offered, according to the company. That shows investor appetite for corporate issues is strong, said Alihan Karadagoglu at Erste Group Bank AG.
“The company has better chances to complete a bond sale this time around because of better market sentiment for Turkish corporates,” Apostolos Bantis, a credit analyst at Commerzbank AG, said by e-mail from London July 15. The airport is “benefiting from the growth of Turkey’s aviation industry,” he said. Having a Malaysian partner “is likely to attract interest from Asian investors,” Bantis said.
Strong demand for Turk Telekom’s offering in June reflects the current trend on corporate bond markets, Karadagoglu, a senior corporate bond analyst at Erste in Vienna, said by e-mail July 15. The average yield on Turkish corporate debt was 5.04 percent at 8:01 p.m. in Istanbul yesterday, down from 5.97 percent a year ago, according to JPMorgan Chase & Co. indexes. The average for emerging markets was 5.05 percent, the data show.
“Emerging-market bonds as well as the high-yield segment benefit from low volatility and high liquidity and from yield chasing by investors,” Karadagoglu said.
Passenger traffic growth at Sabiha Gokcen was 35 percent in the first five months of the year, the biggest among European airports, according to data from Airports Council International Europe. The airport plans to increase its annual capacity to 32 million passengers, relying on 14 million euros ($19 million) of investment, Bugday said, without giving a timeframe.
The Turkish government plans to add a second runway within two years that will enable larger aircraft including Airbus’s A380s to use the airstrip. “We plan to build a satellite terminal between the two runways and that will increase our capacity to 45 million passengers a year,” Bugday said.
Turkish Airlines, the country’s flagship carrier, is driving passenger growth at Sabiha Gokcen by adding more domestic and international flights as Ataturk nears full capacity. The airport is also used as a hub by Pegasus Hava Tasimaciligi AS, Turkey’s biggest low-cost airliner, Bugday said. Ataturk is operated by TAV Havalimanlari Holding AS.
The lira weakened 0.4 percent to 2.1281 per dollar in Istanbul. Turkey’s two-year yields increased seven basis points to 8.18 percent even as the central bank cut interest rates yesterday.
“The revival of Turkish corporates’ and banks’ international bond sales is likely to continue,” Bantis said. “We clearly expect a new wave of Turkish corporate bonds as long as the market conditions remain favorable.”