News
Following on from the three jumbo-sized transactions completed last month, November opened with two more billion dollar-plus Australian syndicated bank deals. Despite the preponderance of bank market debt refinancing in what remains a volatile capital markets environment, both the latest loan borrowers tell KangaNews they are confident they will return to bond issuance when markets normalise.
The race to be the first Australian bank to issue a covered bond is heating up as ANZ Banking Group (ANZ) joined National Australia Bank (NAB) in finalising ratings for its covered bond programme. NAB initially appeared to be in pole position following the seeding of its cover pool and confirmation of its programme's triple-A rating in a presale report from Fitch Ratings (Fitch) on November 2, but the ANZ programme secured triple-A ratings from Fitch and Moody's Investors Service just a day later.
Completing annual results season for Australia's big four banks on November 3, ANZ Banking Group (ANZ) continued the trend for subtly differing liquid assets strategies by disclosing a liquids portfolio in which supranational paper is included in its highest priority "class one" category. Meanwhile, the bank has run into some headwinds in its global markets business, with a second half revenue collapse ascribed to balance sheet and trading factors.
On November 22 Contact Energy (Contact) (BBB/BBB) completed the bookbuild for its subordinated retail transaction having added NZ$25 million (US$18.7 million) of oversubscriptions to the initial NZ$150 million volume. The final deal size of NZ$200 million was announced on December 20. The deal's coupon was also set at 8 per cent until the first reset date.
Westpac Banking Corporation (Westpac) added A$21 billion (US$21.7 billion) to its holdings of level one liquid assets – comprising cash, and government and semi-government bonds – over the course of its 2010/11 financial year. Announcing its annual results on November 2, Westpac revealed total liquid assets holdings of A$103 billion at the end of its financial year, with almost all the growth from the A$82 billion held at the end of 2009/10 coming in level one securities.
On October 31 Wesfarmers (A-/Baa1) launched and priced its first domestic transaction in more than two years. The new five-year A$500 million (US$526.8 million) issue was upsized from a launch volume of A$300 million and priced at the indicative margin of 150 basis points over swap. It follows a A$200 million 2016 transaction from Airservices Australia (AAA) on October 26, which priced at 110 basis points over swap and was the first Australian corporate transaction completed since early July.
The Australian syndicated loans market has caught fire in recent weeks with three billion dollar-plus transactions closing. Loans intermediaries are hopeful that the market will remain an attractive option relative to bonds, saying a reduction in available liquidity – for the first time since the financial crisis – is offset by widened spreads and heightened volatility in debt capital markets.
The first non-financial corporate transaction was completed in the Australian market in the week beginning October 25. Elsewhere, markets were generally subdued with Woolworths (A-/A3) completing a hybrid deal and Bendigo and Adelaide Bank launching a new residential mortgage-backed securities transaction.
A return to the era of government-guaranteed bank funding came closer on October 26, when a European Union (EU) leaders' statement revealed guarantees are an important constituent part of a plan to shore up European banks' medium-term funding. The plan does not currently have significant detail attached, but the EU statement says measures are "urgently needed and are necessary in the context of strengthening prudential control of the EU banking sector".
A new residential mortgage-backed securities (RMBS) deal from Bendigo and Adelaide Bank (BEN) priced on October 28. The transaction was upsized to A$750 million (US$800.3 million) from its indicative volume of A$500 million, and is the issuer's second RMBS transaction of 2011.
National Australia Bank (NAB) gave a strong hint of its expectations for Australia's future liquid assets regime at its annual results presentation on October 27, by excluding its A$21 billion (US$22 billion) of internal residential mortgage-backed securities (RMBS) from its liquid asset holdings. The bank also disclosed a larger and more conservatively constructed liquids book than the most recent previous big four bank to announce results.
On October 26 Woolworths (A-/A3) set the margin for its hybrid securities, called Notes II, at 325 basis points over the bank bill swap rate (BBSW) – at the lower end of the marketed range. Due to strong demand, the company increased the offer to A$700 million (US$733.3 million), from the A$500 million at launch on October 18.