News
Recent predictions that Kangaroo deal flow in January would be down on the same month last year have been confounded, with the record for Kangaroo issuance in a single month being broken on January 20. The surprise factor appears to be consistently strong demand from the domestic investor base, with real money selectively joining a robust bank bid.
European Investment Bank (EIB) (AAA/Aaa/AAA) completed its second transaction of 2011 on January 21, in the form of a A$350 million (A$345.9 million) increase to its 2014 line. It also added a A$350 million floating rate note (FRN) tranche to the same maturity, following in the footsteps of Rentenbank - which issued a A$425 million FRN on January 19 - and Kommunalbanken Norway - which inaugurated a A$100 million FRN on January 18 before tapping it for the same amount two days later.
The Australian domestic corporate bond market has seen its first transaction in the month of January since 2003 with Volkswagen Financial Services Australia (VW) (A-/A3) pricing a new four-year bond on January 21. The deal achieved volume of A$150 million (US$147.7 million) including a A$50 million upsize from launch a day earlier.
The record for Kangaroo issuance in a single month has been broken, with KfW Bankengruppe (KfW)'s (AAA/Aaa/AAA) latest A$700 million (US$697.1 million) tap bringing January 2011's total Kangaroo volume to A$6.45 billion on January 20. The previous record was set in March 2010, when A$6.4 billion of Kangaroos were issued. And this month's volume is set to increase further, with another deal launched by European Investment Bank (AAA/Aaa/AAA) on the same day.
A second Canadian bank debuted as an issuer of covered bonds in the Kangaroo market, with Bank of Novia Scotia (Scotiabank) (AA-/Aa1/AA-, with covered bond programme ratings of AAA/Aaa/AAA) completing a A$1 billion (US$994.5 million) three-year transaction on January 20. The bank recently roadshowed in Australia but has previously never issued in the market in covered bond or unsecured format.
National Australia Bank (NAB) (AA/Aa1/AA) issued a new A$1.25 billion (US$1.25 billion) fixed and floating rate new line on January 19, in what is the second Australian dollar benchmark issued by a local big four bank in 2011. The deal is NAB's first benchmark in its domestic market since November 2010, when it sold A$1.3 billion in a fixed and floating rate September 2014 maturity tap.
On January 19 Rentenbank (AAA/Aaa/AAA) priced a new January 2016 Kangaroo bond, selling A$800 million including a floating rate note (FRN) tranche for over half the total. This is the second Kangaroo FRN to price in 2011, following Kommunalbanken Norway's (AAA/Aaa) deal from the previous day.
ANZ (AA/Aa1/AA-) has completed its first Samurai bond of 2011, issuing a ¥86.1 billion (US$1.04 billion) dual-tranche five-year deal on January 14. The transaction continues ANZ's recent pattern of Samurai issuance – the bank has issued a benchmark deal in Japan in the first quarter of each year since 2008 – and market participants believe certainty of execution and favourable pricing will assist a developing pipeline of deals from Australian issuers in the first quarter.
Kommunalbanken Norway (KBN) (AAA/Aaa) increased its October 2014 Kangaroo by A$250 million (US$248.1 million) on January 18, adding to the transaction a new 2015 maturity floating rate note (FRN). The transaction was KBN's first Kangaroo issue since August last year, when it priced A$100 million in the third tap to its February 2013 maturity.
On January 17, World Bank (AAA/Aaa) mandated an increase to two of its Kangaroo lines – the October 2014 and October 2020 – in what will be the first taps to both lines. The forthcoming transactions are set to become the fifth and sixth deals to price in the Kangaroo market in 2011 and are expected to add significant volume to the A$2.2 billion (US$2.2 billion) of Kangaroos sold so far this year.
SNS Bank (A-/A3/A-) has bought back the majority of paper in its single outstanding maturity in Australian dollars. The buyback reduces the original volume of A$200 million (US$199.4 million) on issue in each of the line's fixed and floating rate tranches, both of which are subordinated, by A$174.75 million and A$171.6 million respectively.
Although intermediaries believe the first months of 2011 are unlikely to surpass record Kangaroo issuance levels seen at the start of 2010, there is a degree of confidence that encouraging early deal flow in the Kangaroo market will be maintained. Several sources point to a number of roadshows being undertaken by names across asset classes – including the supranational, sovereign and agency (SSA), financial institution (FI) and covered bond sectors – as a reason for optimism.