Budapest Airport financing

Location:

Hungary

Project number:

49046

Business sector:

Transport

Notice type:

Private

Environmental category:

B

Target board date:

07 Jun 2017

Status:

Disbursing

PSD disclosed:

21 Jul 2017

Translated version of this PSD: Hungarian

Project Description

Provision of €100 million in a senior note facility as part of a €1.32 billion financing package to restructure the balance sheet of Budapest Airport Kft. The funds will be used to amend and extend existing debt facilities maturing at the end of 2019 and 2020.

The new financing package will be split into a banking tranche of €795 million and an institutional investor tranche of €525 million. EBRD will participate in the institutional investor tranche for €100 million.

Project Objectives

With the proposed transaction, the Bank will support Budapest Airport Kft in its efforts to raise long-term capital from non-banking debt providers (e.g. pension and insurance companies), most of which would invest into Hungarian infrastructure debt securities for the first time.

Transition Impact

The project supports the development of a PPP secondary capital market which attracts institutional investors. A successful institutional tranche placement will have a significant demonstration effect in the market. As such, the Bank's participation will help Budapest Airport to extend the maturity of its existing debt and will also act as a catalyst for attracting international institutional investors.

Client Information

AIRPORT HUNGARY TANACSADO KFT

Airport Holding Kft., a limited liability company incorporated in Hungary for the acquisition of Budapest Airport Zrt, itself a special purpose vehicle incorporated in Hungary and awarded a 75-year Asset Management Agreement in 2005 to upgrade, operate and manage Budapest Airport.

Airport Holding Kft is 100 per cent owned by the consortium of AviAlliance GmbH, Caisse de Depot et Placement du Quebec and Malton Investment Pte. Ltd.

EBRD Finance Summary

EUR 100,000,000.00

Total Project Cost

EUR 1,320,000,000.00

Environmental and Social Summary

Categorised B (ESP 2014). The Project involves a loan to the Budapest Airport (the Company) for the restructuring and strengthening of its balance sheet and it does not involve any CapEx investments. The Company has been in operation since the 1950's. The environmental and social due diligence (ESDD) undertaken by the ESD showed that the continued operation of the airport is associated with some environmental and social impacts and risks, which are site specific and are currently being addressed by the Company under relevant permits and licences. The Company operated in compliance with the national and EU relevant environmental legislation and has the capacity to meet the EBRD's Performance Requirements (PRs).

The ESDD, reviewed the results of the previous DD undertaken in 2014 and updated it through the review of the up-to-date information provided by the Company, independent legal DD undertaken for the transaction and a visit to the airport including airside facilities and discussions with the Company's management. The Company operates in line with certified Quality and Energy Management Systems. Although not certified to international standards, other management systems cover environment, health and safety, and prevention and control of major industrial accidents and are in line with the PRs and have shown to be effective. Environmental permits in place include: overarching Environmental Operational Licence (issued in 2015 and valid until 2025), Airport noise zoning designated by the Hungarian Civil Aviation Authority in 2016 and a set of specific licences in relation to: air quality management, emission trading, waste management and dangerous substances.

The Company oversees all activities at the airport but certain key functions such as airside handling, air traffic control, baggage handling and fire services are provided by separate companies. The Company is, however, able to influence and guide the activities and associated E&S performance of these companies to ensure they are in line with the Airport Rules, which include various E&S provisions associated with noise, air quality, health and safety, waste and wastewater management, wildlife management, contractor management and traffic issues. The airport is operating under specific noise protection rules, as updated by the authorities in 2016. Noise levels are monitored at various locations and are below permitted thresholds. Despite this, the Company provides support for neighbouring communities in terms of noise insulation and further discloses weekly information on maintenance activities, which may affect flight patterns. Flight restrictions are in place to limit night time noise. Air quality is monitored by a continuous monitoring station. All parameters measured are currently below the permitted limits for air quality. All wastewater on site is directed to the municipal wastewater treatment plant and is continually monitored. Waste is segregated on site and disposed of, as appropriate, by specialist companies.

The Company is active in the area of reduction of the green houses gases emissions both from their direct operations (the Company developed and implements an Energy and Carbon Management Plan, and holds Airport Carbon Accreditation at Level 3), as well as by influencing their business partners through setting Green Airport Partner Program, acting as a monitoring and good practice sharing platform.

The Company oversees occupational health and safety, which extends to vehicle traffic and contractors at the airport and has in place various H&S procedures applicable to different airport areas and functions. Access to certain areas, such as airside operations, is heavily restricted. The necessary emergency preparedness and response plans are in place in line with ICAO requirements.

Fire, medical and emergency services are in place and provided by independent companies. The airport is not located on any bird migratory routes. Bird collisions are avoided through the use of sonic transmitters, sonic cannons and traps. Efforts are made to relocate animals, which attract birds of prey, in collaboration with the environmental authorities.

The Company's HR provisions are in line with local requirements and PR 2. The Company currently employs directly circa 620 people with additional 350 in the Group (employed by Security and Fuel Handling subsidiaries), out of which circa 40% female and 60% male. There are 3 trade unions active in the Company who are regularly consulted in crucial decisions and documents such as the Wage Agreement set up for 2017. In 2012 the Company underwent a redundancy programme as a result of the bankruptcy of the national carrier, Malev. Staff numbers were reduced by approximately 20%.

The Company confirmed that this process is complete and there are no remaining claims against the Company. No further redundancies are planned.

The Company regularly discloses substantial E&S information through its website, including Sustainability Report since 2014 and provides more detailed information to certain stakeholders on request. A limited number of individuals occasionally complain or submit comments to the airport and these are addressed through the Company's grievance mechanism and the Company regularly engages with these individuals, including through face to face meetings, to address their concerns.

The Company is in line with the Performance Requirements and the ESDD concluded that no ESAP is required. The Company will be required to continue to operate in line with the PRs and to submit annual environmental and social reports to the Bank.

Technical Cooperation

None.

Company Contact Information

René Defize
DefizeR@ebrd.com
+44 207 338 8377

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