January 15, 2025 10:38 GMT
TRANSPORTATION: Milan Airports parent 7Y FV (x2)
TRANSPORTATION
(SEASPA; NR/A-) (private; City of Milan holds 55%)
An interesting deal; smaller by passenger numbers but low levered, middle-of-the-pack margins with a somewhat favourable regulatory framework. Well diversified by airline and revenue stream. We ignore the single €25s given it traded without ratings. Headroom on leverage means we would not rule out a revisit.
- WNG €300m 7Y IPT MS+150a vs. FV +100 (-50)
- 3m par call, CoC at par
- Manages Milano Malpensa, Italy's 2nd largest airport (2 runways), and smaller Milano Linate.
- Though it has UoP marked as general, it is likely refi for the €300m Oct 25s (only bond outstanding).
- Standalone rating of A+. Italy's BBB rating means S&P is forced to cap it at +2 notches above (A-). For ref. BTPs give +90 over swap on the 7Y.
- Unlike Heathrow this is dual-till regulatory framework (regulator only considers air aviation revenue/costs when setting charge framework). 5-yearly periods, new framework to be implemented in 2025 and run till 2028 (was meant to be 2024-28).
- S&P notes it is one of the few (alongside Royal Schiphol and Aeorporti di Roma) that has traffic volume protections from regulator (if it varies higher or lower by certain threshold it can recover (or needs to return) revenue).
Per passenger aviation revenue is middle to lower-end of pack. Note this is only aviation side (57% of revenue for it). - It manages Milano Malpensa, Italy's 2nd largest airport (2 runways) and smaller Milano Linate.
- Total passengers of 35m in 2023 (now back at pre-covid levels) and growing circa +10% in 2024 (yet to report Dec). This is smaller than most - comparable to UK's 2nd largest airport Gatwick (41m).
- 74% for leisure, 26% business. 44% travelling to Europe, 30% outside and 26% domestic in Italy.
Low-cost carriers make up 42%. Top 3 airlines are; 22% easyJet, 16% ITA (which Lufthansa has taken a 40% stake in) and 4% Ryanair. Well diversified away from any one airline (e.g. Gatwick is near half exposed to easyJet).
- 74% for leisure, 26% business. 44% travelling to Europe, 30% outside and 26% domestic in Italy.
- FY23 revenue of €724m well diversified with 42% non-aviation (that portion will be unregulated). EBITDA of €292m (40% margin - middle of the pack) vs. gross/net debt of €475m/€282m - implying net leverage of 1x (very low levered). S&P has company soft threshold of around 2.0x implying headroom.
- 1H revenues are +14%, EBITDA +23% (on 42% margin).
- It flags 2026 winter Olympics which Milan & Cortina are co-host cities. The impact of this is questionable after what we saw in Paris (displaced normal traffic).
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