However, in the eye of the storm, the decision to invest needed strong conviction and confidence in the company’s stability.īusiness Profile: A world before COVID-19Īustralia’s unique geography as an island continent, with widely dispersed capital cities, makes air travel a necessity.
Now that the storm has passed and normality is returning, the opportunity seems obvious, particularly given it is a highly defensive core infrastructure asset. To illustrate the scale of the opportunities that presented themselves through the pandemic, Brisbane Airport senior secured debt with a 10-year maturity has delivered investors a total excess return of around 20%. However, in the midst of the chaos, a high level of conviction in backing proprietary research and investing in a contrarian manner is required to capture these opportunities. The key to identifying these opportunities is to have already done the groundwork on assessing the company, engaging with management to stress test worst case scenarios and their response, and most importantly to look beyond the crisis and work through the issues at hand.Įvery crisis is unique and, with the benefit of hindsight, the opportunities that they provide may appear obvious. In our experience, amid the peak fear and volatility lie some of the greatest investment opportunities for investors. In the pandemic environment, which included lockdowns, international border closures and a shift to virtual meetings, investors were concerned about the future recovery of air travel. The air travel industry, and more specifically major Australian airports senior secured debt, was caught in the eye of the storm, with nervous investors withholding capital having experienced severe mark-to-market losses. Even in the context of 100 years of corporate data, which includes The Great Depression, it’s hard to fathom such a dramatic shock. The COVID-19 pandemic challenged credit investors with a shock that hasn’t been experienced in our lifetimes – even sound, defensive ‘core national infrastructure’ businesses experienced revenue falls of more than 90% overnight. Research and company engagement, along with conviction to look beyond temporary crises can reveal strong investment opportunities which only present themselves in periods of market panic.In the midst of the pandemic, the airport sector was heavily sold-off as investors pulled back from the sectors worst hit.By Jay Sivapalan – Head of Australian Fixed Interest, and Dinesh Kuhadas – Credit Analyst