Australian corporates set new record for bond issuance

Key points:

1. According to Bloomberg data, a total of A$44.26bn in debt was issued domestically for the calendar year to date versus A$37.52bn in the same period in 2013.
2. As the US continued to offer cheap funding opportunities, Australian corporates made A$84.52bn equivalent in public and private placements in the US; 1.9 times more than they issued into the Australian corporate domestic market.

Issuance activity in the debt capital markets started slowly in calendar year 2014 but then increased and stayed relatively steady for the next seven months through to the end of August. According to Bloomberg data, a total of A$44.26bn in debt was issued domestically between January 1 and November 25 (by Australian entities in AUD currency), excluding Australian government and semi-government bonds. This is significantly up from A$37.52bn in the same period in 2013.

The lowest volume was recorded in January (A$0.90bn) while November contributed the most with A$6.65bn issuance.  Government and semi-government entities issued A$56.40bn of debt for the year to date, up 20.69% from the same period in 2013.

According to the Reserve Bank of Australia, private sector credit grew by 4.7% in the 12 months through May 2014 (the second highest issuance for the year of A$5.23bn), which was the fastest annual pace since March 2009. Australian corporate issuers (excluding financials) sold mostly bonds with maturities of seven years while the US dollar and Euro markets provided scope for longer dated debt in 2014.

Figure 1

Activity in the Residential Mortgage Backed Security (RMBS) market was weaker for the year to date compared to the same period in 2013. Overall, RMBS issuance totalled 37 deals worth A$30.75bn (Australian tranches only), slightly less than the 41 deals worth $A32.83bn recorded in the first 11 months of 2013.

The biggest issuers for 2014 were CBA (Medallion Trust) with A$6.51bn, Westpac Banking Corporation (WST 2014-1) with A$2.5bn, The Superannuation Members Home Loan (SMHL 2013-1) with A$1.45bn, Macquarie Securitisation Limited (PUMA 2014-1) with A$1.4bn, ING Bank Australia (IDOLT 2014-1) with A$1.25bn and Resimac (Resi 2013-1X) with A$1.22bn.

According to Bloomberg data, Australian companies issued A$125.47bn in GBP, USD and EURO currencies offshore in the year to date, up 26.3% from the same period last year. The first six months of calendar 2014 were the strongest since 1999. Banks issued bonds offshore at three times the volume of their local issues as demand from US and European investors and cheaper funding rates helped to cut costs. The big four banks dominated offshore issuance.

The US was the dominant market with issuance of A$84.52bn equivalent in public and private placement deals. CBA was the leading offshore issuer of US dollar denominated bonds for the year to date and raised US$21.58bn of debt, which was closely followed by NAB with US$16.22bn and ANZ with US$9.51bn.

However, Euro and GBP issuances were well below USD issuances. Euro issues totalled A$29.73bn equivalent for the year to date, up from A$26.62bn for the same period in 2013, while GBP issues were A$11.22bn up from A$3.67bn. The biggest issuers of Euro denominated bonds were NAB with A$7.19bn, ANZ with A$5.44bn and CBA with A$5.02bn.

Origin Energy issued A$1.43bn equivalent while Sydney Airport, the largest non-financial borrower in the first six months, sold €1.02bn of ten year notes in April 2014. The biggest issuers of GBP denominated bonds were CBA with A$1.20bn followed by NAB with A$1.04bn and Macquarie with A$0.46bn.

Table 1

There were 18 newcomers to the Australian market this year. Many were international companies issuing in Australian dollars; these issues are known as Kangaroo bonds.

• The biggest issuer of the year was Toronto Dominion Bank with a A$1bn Australian dollar denominated bond issue. The Canadian legislative covered bond transaction was backed by Canadian prime residential mortgage loans.
• Svenska Handelsbanken issued a A$450m inaugural dual tranche Kangaroo bond.
• Bank of Communication Sydney Branch came to the market with a three year A$350m floating rate note.
• Emirates NBD priced a five year transaction of A$400m. 
• Abu Dhabi Commercial Bank came to the market with A$225m five year fixed rate bond.
• The World Bank launched its first ever green bond issue, raising A$300m. The bonds are designed to fund projects targeted at climate change issues which directly affect developing countries.  
• Among the new names were bonds originated by FIIG Securities Ltd: Coffey Corporate Pty Ltd with A$40m, 360 Capital Investment Management Limited with a deal worth $75m; and Plenary Bond Finance Unit Trust with A$35m.
• Glencore Australia Holdings, one of the world’s largest diversified natural resources companies, issued its debut five year domestic deal, raising A$500m.
• Alumina Limited (a leading Australian resource company with a specific focus on alumina) issued a A$125m Kangaroo bond.
• The Local Government Funding Vehicle (LGFV) raised A$240.09m. The LGFV is Australia’s first collective vehicle for funding local authorities. It aims to provide lower-cost capital markets funding for councils in the State of Victoria.
• Global Switch Property issued a A$100m bond.
• Aquasure Finance the funding vehicle of the Victorian desalination project launched a seven year fixed rate bond worth A$150m.
• Anglo American Capital (Anglo American metallurgical coal business is the second largest Australian and third largest global export metallurgical coal producer) issued its inaugural A$500m bond in the market.
• Aurizon Holdings Ltd (Aurizon Group) Australia’s largest rail-freight operator launched its debut A$525m largest ever single tranche AUD deal.
• Connect East Finance issued a new A$250m seven year domestic bond which was an inaugural transaction for the owner and operator of the EastLink tollway.
• Incitec Pivot a global manufacturer and marketer of commercial explosives and fertilisers raised A$200m this year.

 Source: KangaNews

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