News

Domestic medium-term note (MTN) transactions from three issuers in the property sector – Leighton Holdings (Leighton) (BBB/Baa1) subsidiary Leighton Finance, Dexus Property Group (Dexus) (BBB+) and Australian Prime Property Fund Retail (APPF Retail) (A) – raised a total of A$640 million (US$520.26 million) at pricings on July 20 and 21.

Westpac New Zealand (Westpac NZ) (AA/Aa2) increased the size of its 2014 government guaranteed domestic transaction by NZ$225 million (US$147.33 million) on July 21 – bringing volume to a total of NZ$575 million just eight days after first selling the bond, which is the bank's first under the domestic wholesale guarantee.

The fledgling revival of the corporate bond market in Australia continues to focus on names from the property sector, with Lend Lease asset management subsidiary Australian Prime Property Fund Retail (APPF Retail) (A) launching a A$150 million (US$119.87 million) three-year maturity transaction on July 17 and at least two other property issuers understood to be circling.

Already the most active Kangaroo borrower in 2009, KfW Bankengruppe (KfW) (AAA/Aaa/AAA) became the largest volume issuer as well with the July 17 pricing of its fourth Kangaroo transaction of the year in the form of a A$250 million (US$200.28 million) increase to its recently inaugurated 2014 line, bringing its outstanding volume to A$1 billion.

On July 17 Bank of Scotland Australia Branch (BoS Australia) (A+/Aa3/AA-) priced its three-year domestic transaction supported by the UK government guarantee, selling a total of A$1.75 billion (US$1.41 billion) of fixed and floating paper at 70 basis points over swap and bank bill swap rate (BBSW) in a deal the issuer says was oversubscribed.

With the end in sight for investment into residential mortgage-backed securities (RMBS) from the Australian Office of Financial Management (AOFM), especially for authorised deposit-taking institution (ADI) issuers, some mortgage originators are increasingly open to sourcing funds in the vanilla bond market while moving away from a traditional reliance on securitised issuance.

The second and last transaction from the second round of Australian Office of Financial Management (AOFM)-supported residential mortgage-backed security (RMBS) activity priced on July 14, with Australian Central Credit Union (ACCU) bringing a total of A$263.2 million (US$206.09 million) to market – A$190 million of it purchased by the AOFM.

The first deal in the penultimate round of residential mortgage-backed securities (RMBS) investment by the Australian Office of Financial Management (AOFM) began on July 10, with Wide Bay Australia achieving an upsize of A$33.5 million (US$26.15 million) in its A$433.5 million transaction.

The Kauri deal launched by World Bank (AAA/Aaa) on July 9 achieved volume of NZ$300 million (US$189 million) in the anticipated new five-year line a day later, with pricing on the transaction of 37 basis points over the benchmark 2015 New Zealand government bond – understood to equate to mid-20s basis points over five-year swap.

Heritage Building Society (HBS) (BBB/Baa3) issued a total of A$400 million (US$312.72 million) of government guaranteed three- and five-year bonds on July 9 with the issuer saying it expects to return to the vanilla market more frequently in future as it switches its wholesale funding out of the challenged asset-backed security (ABS) market.

The most active Australian borrower in the unguaranteed arena, Commonwealth Bank of Australia (CommBank) (AA/Aa2/AA), priced the first five-year maturity unguaranteed transaction from a domestic Australian bank for almost a year on July 7, with the issuer saying real money demand drove an upsize from A$500 million (US$397 million) at launch to A$2 billion.

Four antipodean government-related entities (GREs), two of which have recently issued AUD bonds, could be affected by Standard & Poor’s (S&P)’s new methodology for assessing the credit quality of the sector. Airservices Australia (AsA) (AAA) seems likely to retain its top rating, while Australia Post (AAA) has been placed on negative credit watch and says it plans dialogue with S&P with a view to securing its own triple-A.