Manchester Airport Group's return to the sterling market just over six months since its last outing highlighted how much credit spreads have moved in the intervening period. At a time when whole business securitisations are under scrutiny thanks to Thames Water's troubles, MAG achieved its "tightest print ever" on Monday, according to a lead banker, underlining how investors remain keen on UK infrastructure. However, given the tight print, which still left a final 10bp premium based on pre-announcement secondary levels, the book shrank by a third from its peak, with the deal just 1-1/2 times covered by the end of its execution. The group, which owns and operates three UK airports, Manchester, London Stansted and East Midlands, issued £300m of September 2042 senior secured bonds at 115bp over Gilts, 15bp inside initial price thoughts, for a semi-annual yield of 5.783%. "The transaction provides efficient funding terms," said the banker. In September, MAG issued £360m of September 2041s at plus 155bp, or a semi-annual yield of 6.167%. Such has been the performance of the 2041 bonds that a second lead banker said that ahead of the new deal's announcement it had tightened to plus 105bp, albeit it widened to plus 113bp while the latest issue was in progress. Barclays, CIBC, HSBC, NAB and NatWest Markets were the lead managers. Order books fell from a peak of more than £675m to about £450m as pricing came in line with the tight end of the guidance range of plus 115bp–120bp. The first lead banker said the deal's relatively modest size helped to compress pricing. MAG (Baa1/BBB+; Moody’s/Fitch) also came inside its main peer, Gatwick. The latter has a recently issued £250m April 2040 Class A note offering bid at around its reoffer spread of plus 125bp, said the second lead banker. Gatwick Funding (Baa2/BBB/BBB+) is, however, rated one notch lower by Moody's. MAG's credit profile benefits from a lower leverage ratio than Gatwick's. At the end of its 2023 fiscal year, as of March 30 2023, MAG's net debt to Ebitda was less than 5.5x, according to Fitch from a note in August that announced it was upgrading the group by a notch. The rating agency said it expected leverage to fall further, to 4.5x, by the end of fiscal year 2024. In contrast, in a note from last June, Fitch said that under its base case, Gatwick Funding's projected net debt to Ebitda in 2024 was 5.7x, and that it would rise to 6.5x from 2025 onwards because of shareholder distributions. MAG's diverse asset pool is another distinguishing feature. Manchester Airport is the dominant hub in the north-west, although Stansted faces stiff competition from Gatwick, Heathrow and Luton airports. MAG also has more than £640m of investment property assets across its airports, and has a 50% investment in the £1bn Airport City development at Manchester Airport. However, its business is reliant on tourism and low-cost carriers. "MAG continues to be highly exposed to leisure travel and discretionary spending, which could hit growth in a difficult macroeconomic environment," wrote Fitch in its August note. "Equally, exposure to [low-cost carriers] is high at 86%." Ryanair, for example, represented about 53% of traffic volumes in its 2023 fiscal year. MAG is the largest UK-owned airport operator, with Manchester City Council (35.5%) and nine other Greater Manchester local authorities (29%) among its shareholders. The finances of UK councils are coming under greater scrutiny – the leader of Manchester City Council, for example, wrote an open letter in November to the government, imploring it "to consider urgent measures to ensure that our funding is sufficient, sustainable and strategic". However, leads said investors didn't bring up the council issue during the deal's execution. The other owner of MAG is Australia's IFM Global Infrastructure Fund, which also has a 35.5% stake. MAG's shareholders have invested £650m over the pa
Bellwether