News

A rare fully institutionally targeted unrated transaction in the Australian market demonstrates the increasing willingness of fund managers to engage with transactions without a formal rating, deal sources say. But further flow will likely be constrained by the issuer’s unusual status as an unrated entity with investment-grade metrics.

Lead managers on Telstra Corporation (Telstra)’s A$1 billion (US$752 million) multi-tranche domestic deal tell KangaNews that following a succession of smaller steps the domestic market has taken a giant leap forward with this latest transaction. According to KangaNews data, the deal is Telstra’s largest-ever domestic transaction and it contains the biggest 10-year non-credit-wrapped tranche issued by a nonfinancial corporate into Australia.

On 23 March Sumitomo Mitsui Financial Group (SMFG) printed A$1 billion (US$764.6 million) of five-year notes in a SEC-registered total loss absorbing capacity (TLAC)-compliant benchmark issue. The transaction is the first Australian dollar Asian-origin TLAC-eligible deal and SMFG is the first-ever non-US-domiciled issuer to print a deal in Australian dollars in SEC format.

Appealing pricing and extensive predeal marketing enabled Latitude Finance Australia (Latitude) to attract a multiple-times oversubscription to all tranches of its debut credit-card asset-backed securities (ABS) issue, according to deal sources. This was despite the combination of a new name, new collateral type and a new deal structure for the Australian market.

In the wake of Australia’s first domestic true-corporate green-bond deal, the transaction’s arranger says internal and external drivers point to growing momentum in the asset class. Investa Office Fund (IOF) was well positioned to be the first domestic mover, but it is far from unique as a potential issuer – especially in the property sector.

Having printed its first green bond on 28 March – also the largest to date by a bank in Australia – Commonwealth Bank of Australia (CommBank) says global demand and increasing issuer engagement with the asset class point the way to significant future growth. CommBank issued A$650 million (US$497.1 million) of five-year climate bonds including fixed and floating tranches.

Solid domestic real-money demand supported the long-dated, dual-tranche deal issued by WSO Finance (WSO), the financing entity of the Westlink Motorway Group and 50 per cent subsidiary of Transurban. The issuer tells KangaNews it had a strong preference to execute in the local market while lead managers note a positive shift in domestic investor sentiment.

In the wake of the largest-ever green bond to price in the Australian dollar market – a capped A$750 million (US$575.1 million) seven-year issue by Queensland Treasury Corporation (QTC) – lead managers predict further evolution of the sector in 2017, including corporate supply. The state treasury corporation itself says it sees green bonds forming a regular component of its funding mix.

National Australia Bank (NAB) (AA-/Aa2/AA-) printed A$500 million (US$384.5 million), upsized from A$250 million at launch, in a five-year fixed-rate social “gender-equality” bond on 17 March. The self-led transaction had initial price guidance of 95 basis points area over semi-quarterly swap.

Having priced its second-ever public senior-unsecured transaction – with greater volume than the first and a substantial oversubscription – CUA says market conditions were conducive to its growing funding need. The issuer printed A$300 million (US$227.1 million) in a new floating-rate note on 9 March.

Australian dollars remain an important and reliable route to market for CAF – Development Bank of Latin America (CAF) when its core markets are affected by volatility, the issuer tells KangaNews in the wake of its debut Australian dollar deal of 2017. The issuer says it is also beginning to reap the benefits of its engagement with domestic investors.

Leads on the first-ever total loss-absorbing capacity (TLAC)-compliant transaction denominated in Australian dollars say domestic interest in the deal was high despite complexities around pricing and other headwinds. Most importantly, they say there was apparent willingness to engage on the so-called “tier-three” asset class and little objection to the use of EMTN format.