Qantas Poised for First Aussie Bond Sale Since Ratings Upgradeby
Airline has hired banks to meet with fixed-income investors
Debt market foray follows announcement of record profit
Qantas Airways Ltd. is considering selling its first Australian-dollar bond since the improved fortunes engineered by Chief Executive Officer Alan Joyce prompted rating firms to return the company’s credit score to investment-grade status.
Australia’s biggest carrier, which has been buoyed by cost cuts and a global slump in fuel prices, will talk with fixed-income investors from next Wednesday and may proceed with a local debt deal after that, according to an e-mailed statement Friday from Deutsche Bank AG, which is arranging the meetings along with Australia & New Zealand Banking Group Ltd. and HSBC Holdings Plc.
A deal would mark the Sydney-based airline’s first foray into the market since June 2014, when it priced A$400 million ($305 million) of bonds due in 2021 at a yield premium of 385 basis points above the swap rate. Since then, the so-called Flying Kangaroo has seen its credit score restored to BBB- by S&P Global Ratings and Baa3 by Moody’s Investors Service following more than two years as a junk-rated credit.
The company, which was relegated to speculative-grade status by S&P in December 2013 as its capacity war with Virgin Australia Holdings Ltd. spurred losses, has seen its position improve under the guidance of Joyce. Qantas just posted its first shareholder dividend since 2009 following a record profit.
The airline’s share price more than triple in less than three years as Qantas chopped A$2 billion in costs and froze wages under the CEO’s revamp.
In addition to its 2021 notes, which have rallied by more than a percentage point since they were issued, Qantas also has A$300 million of securities due in May 2022 that were the first notes ever to be issued by a junk-rated borrower in the Australian market in May 2014. Its A$250 million of 2020 debentures were issued in April 2013, before the carrier had its ranking relegated.