Exclusive: AllianzGI backs €1.4bn Budapest Airport refi

New all-senior debt package replaces costly €300m mezzanine facility.

A combination of banks and institutional investors has helped Budapest Airport refinance about €1.4 billion of debt the hub raised nearly three years ago, dramatically bringing down its financing costs.

Allianz Global Investors counts among the institutions that contributed about €525 million worth of institutional term debt, comprising loans with a duration of 10 years (€250 million), 15 years (€275 million), and a liquidity facility, Infrastructure Investor understands. Other institutions potentially involved in the deal include MEAG, Sun Life and Barings, a source said. The quantum of bank debt, part of which was provided by French banks, totals €795 million, sources noted.

Budapest Airport is owned by AviAlliance, a business that wholly belongs to Canada’s PSP Investments (55.44 percent); Malton, a subsidiary of Singapore’s GIC (23.33 percent); and CDPQ (21.23 percent).

The proceeds were used to repay junior debt notes, bearing a fixed 13.5 percent coupon, accounting for €300 million, with the remaining part made up of senior debt. All debt is now senior, according to a spokeswoman for AviAlliance. She added that the newest bank loans’ margins start at 130 basis points above the reference rate, while the final coupon on institutional long-term loans stands at about 3 percent.

All other firms cited above either declined or did not respond to a request for comment.

Budapest Airport was privatised in 2005 under a 75-year concession agreement signed by the Hungarian government and BAA, the UK airport operator. Two years later, the concession was sold to a group comprising AviAlliance (then owned by German developer Hochtief), CDPQ, GIC and a fund managed by Goldman Sachs and KfW.

The airport initially managed to recover from turbulence caused by the financial crisis, but the collapse in 2012 of national carrier Malev, which accounted for nearly a third of the hub’s traffic, culled a large portion of connecting passengers overnight.

The arrival of low-cost carriers strengthened its position, but the airport soon faced a financing cliff, with less than two years to refinance €1.4 billion. It achieved this in 2014 as its business rebounded, but shareholders’ reluctance to inject more equity led it to raise junior debt instead.

This time around, AviAlliance explained, the refinancing’s success owes much to “strong passenger traffic increase during the past years combined with the overall improved performance of the airport, the significantly decreased leverage and, last but not least, an improved Hungarian sovereign credit rating”.

Eastern Europe’s economic rebound has recently cast the spotlight on other airports in the region – late last month, Meridiam, VTB and Vinci were among the firms shortlisted to operate Belgrade Airport, after the initial process sparked 27 offers for the €500 million facility.