Update: Australia's Debt Market Buzzes With New Issues
March 10 2010 - 12:14AM
Dow Jones News
Australia's debt market sparked into life Wednesday with a
succession of bond offers, including the first by a non-financial
corporate since the middle of last year, illustrating the recovery
in credit markets is continuing apace.
The rush to issue comes as investors seek to diversify away from
a steady stream of debt from local banks and borrowers look to
Australia's public debt market as an alternative to other financing
routes.
The cheaper cost of converting Australian dollar borrowings into
their home currency and a more expensive cost of converting foreign
currency into local dollars is also at the core of the rush.
Although banks made up the most of the debt on offer Wednesday,
the list of borrowers included offshore banks, which have been
largely absent from the domestic market, along with non-financial
companies.
Banco Santander, Credit Suisse, BNP Paribas and toll roads
operator Transurban Group were all in talks with investors
Wednesday to sell bonds, market participants said.
Property group Mirvac Group is also said to be close to a debt
issue to replace a bond maturing next week, while Barclays Capital
is considering a possible five year bond offer, priced at 130 basis
points to 140 basis points over the underlying swap rate, market
participants said.
John Manning, credit strategist at Royal Bank of Scotland, said
a desire among investors to mix up their portfolios away form local
banks, coupled with the cross currency basis swap making it more
expensive to borrow offshore is key to the rush of issuance.
"There's a lot of money looking for a home," he said.
Banco Santander SA is considering an offer of three or five-year
bonds, a market participant said, in what would be the banking
group's first issue in the kangaroo bond market. Kangaroo bonds are
sold by offshore issuers in Australia.
Price guidance on the three-year bonds is 120 basis points over
the underlying swap rate, while the five-year discussions center
around 165 basis points. Investment bank JPMorgan is arranging the
discussions.
The bank set up its first Australian dollar debt program last
year and has been linked to various possible acquisitions in
Europe.
Last week, JPMorgan and HSBC broke the kangaroo bond drought by
issuing in Australian dollars, the first outside of supranational
issuers since 2007.
Also Wednesday, Credit Suisse's Sydney branch launched an offer
of four year bonds, fixed and floating rate, with guidance of 120
basis points over swap.
Commonwealth Bank of Australia and Westpac are arranging the
offer.
BNP Paribas is seeking to issue five-year-dated bonds, with
guidance on the offer around 115 basis points over swap, a market
participant said.
On the non bank-side, Transurban Group is considering an offer
of four year dated debt securities, seeking to raise at least A$200
million, market participants said.
The company is speaking with investors about a possible issue
priced around 170 to 180 basis points above the underlying swap
rate, the market participants added.
The fully secured debt carries an extra layer of protection for
buyers in the shape of a step up to a higher coupon in the event of
a credit ratings downgrade for the company.
Public debt issuance in 2009 in Australia, excluding
asset-backed securities, reached A$101 billion - but just A$3.6
billion of this was from non-bank companies. The last issue form a
non-bank company was in the middle of 2009.
In the asset-backed sector, Bendigo and Adelaide Bank Ltd. is
looking to sell around A$650 million in residential mortgage-backed
securities. The pricing will be on or before March 17.
-By Enda Curran, Dow Jones Newswires; 61-2-8272-4687; enda.curran@dowjones.com
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