Conclusion and Recommendation
The King Air bond presents an attractive investment opportunity, giving investors exposure to the local aeronautical industry. The bond has an implicit government guarantee that reduces default risk, while also offering a competitive yield above U.S. dollar denominated GoJ bonds with similar maturities. Notably, NMIA’s projected recovery in passenger traffic, which is expected to surpass pre-pandemic levels by 2025, supports a positive revenue outlook. Additionally, Packal’s ongoing operational improvements at NMIA are expected to enhance safety and efficiency, further strengthening NMIA’s ability to serve a growing passenger base, and ultimately, King Air’s ability to service its coupon payments. As such, we recommend investors OVERWEIGHT this offer in their portfolio, particularly those with a moderate to aggressive risk profile seeking consistent interest payments with a medium- to longer-term investment horizon.
| Industry: | Transportation Services |
|---|---|
| Security Name | KINAIR 6.75% 12/15/36 |
| Credit Rating (Moody's)/Outlook | Ba3/Stable |
| Maturity | December 15th, 2036 |
| Issue Size | US$480 Mn |
| Rank | Senior Secured |
| Current Price (Oct 1, 2024) Source: Bloomberg | US$103.70/US$103.91 |
| Yield to Maturity (Bid/Ask) | 6.28%/6.26% |
| Yield to Worst (@maturity) | 6.29% |
| Recommendation | OVERWEIGHT |
Date: October 4, 2024
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