International flow is back on the agenda in Australasia, with Australian and New Zealand banks and corporates looking offshore to place deals while Kangaroo issuers continue to come to the market in a steady stream. Market participants say the basis swap is improving for European issuers into Australia, while bank activity is also predicted to return to the domestic market in the near future.
KfW Bankengruppe (KfW)'s (AAA/Aaa/AAA) TD Securities, UBS Investment Bank and Westpac Institutional Bank-led May 2015 Kangaroo bond increase closed with a A$700 million (US$627.2 million) volume on July 29. This transaction follows the issuer's A$850 million tap to its December 2019 bond that priced on July 15.
Export Development Canada (EDC) (AAA/Aaa) has priced its inaugural Kangaroo bond – a five-year deal which was upsized to A$650 million (US$580.5 million) from a minimum target size of A$300 million. Commonwealth Bank of Australia, RBC Capital Markets and TD Securities are joint lead managers on the transaction, which priced on July 28.
On July 23 Tasmanian authorised deposit-taking institution (ADI) MyState Financial priced a total of A$250.25 million (US$222.92 million) in its Conquest Series 2010-2 (Conquest 2010-2) public debut residential mortgage-backed securities (RMBS) transaction, with support from the Australian Office of Financial Management (AOFM).
The Australian issuance story this week was once more dominated by high-grade names, with a brace of high-volume Kangaroo deals continuing a growing trend. While European borrowers are far from ecstatic about pricing discrepancies between issuers, intermediaries believe that the Australian market nevertheless remains favourable and primed for future issuance.
Queensland Treasury Corporation (QTC) (AA+/Aa1) will list two new shorter-term benchmark lines covered by the guarantee of the state of Queensland as a consolidation offer out of existing, similar maturity federally-guaranteed benchmarks. The corporation expects to price the consolidation of its 2011 and 2012 lines no later than July 23.
European Investment Bank (EIB) (AAA/Aaa/AAA) has priced A$1 billion (US$892.9 million) in a a new 10-year Kangaroo line. It is the third Kangaroo transaction to come to the market in a week, following almost a month without issuance. The August 2020 issue, which priced on July 22, was lead-managed by Deutsche Bank, RBC Capital Markets and TD Securities.
World Bank (AAA/Aaa/AAA) has priced an increase to its December 2014 Kauri bond. This transaction is the first Kauri issued since Telstra Corporation's NZ$100 million (US$70.6 million) deal priced on May 6. The World Bank line now has NZ$1.025 billion million outstanding, making it the first Kauri of over NZ$1 billion
International Finance Corporation (IFC) (AAA/Aaa) has sold A$500 million (US$446.45 million) in the inauguration of its longest-dated Kangaroo. As with the 2019 transaction placed by KfW Bankengruppe (AAA/Aaa/AAA) on July 15, IFC has placed a long-term issue in the form of a new 10-year benchmark deal.
The stars appear to be aligning again for sustained issuance in Australia with a domestic bank benchmark, a landmark corporate transaction and a large Kangaroo increase suggesting there could be activity in several market sectors. Market participants are cautiously positive about market prospects, although deal flow has been patchy since April.
Lead managers on the 2020 transaction priced on July 15 by APA Group (APA)'s (BBB/Baa2) wholly-owned subsidiary, APT Pipelines, say the deal is a clear demonstration of the capacity of the Australian corporate market to offer volume and term. The offer was upsized to A$300 million (US$264.12 million) at a margin of 240 basis points over swap.
Retail market users have responded positively to the launch of a new ratings agency, Australia Ratings, which is the first to secure a licence to offer its credit ratings to retail investors. But the start-up firm faces both short- and long-term challenges in establishing a franchise, even though none of the existing agencies have elected to seek retail licences in Australia.