News
Australia’s mutual and customer-owned banks – often the forgotten sector of the local lending market – are at a critical juncture. The competitive environment presents an unprecedented growth opportunity but to take advantage many mutuals may need to overhaul their funding and capital strategies.
The global derivatives community gathered in Hong Kong in April for the International Swaps and Derivatives Association (ISDA) AGM, with interbank offered rate (IBOR) transition top of the agenda. Progress towards a new market paradigm continues to be made but the scale of a task in which cash markets have a key part to play cannot be underestimated.
A changing business profile, including a higher proportion of commodity-sales income, led Mineral Resources to undertake its first-ever debt capital markets transaction in the US dollar high-yield market, according to the issuer. The deal serves to reset the issuer’s capital structure better to match its long-term assets.
The Australian Prudential Regulation Authority (APRA) has hinted that its plan for the forthcoming Australian loss-absorbing capacity (ALAC) regime to be funded predominantly via tier-two instruments may not be set in stone. It remains unclear what shape the final regime will take, but more options now appear to be on the table than first thought.
In the wake of its latest New Zealand residential mortgage-backed securities (RMBS) deal, Resimac says structural changes in the local mortgage market are opening opportunities for nonbanks in prime mortgage lending and, therefore, securitisation. The issuer also says the depth and breadth of bids for its paper broadened in the new transaction.
Downer Group Finance (Downer) priced its first Australian dollar deal since 2015 on 15 April. Issuer and leads say significant developments in Downer’s business composition opened the deal up to a broader suite of investors, while prevailing market sentiment induced a rapid book build and tightened pricing.
The scale of demand for Woolworths’ debut green bond – which supported a significant price revision – further demonstrates the potential of the asset class for local corporate borrowers, issuer and leads say. Demand for certified sustainable bonds could even be sufficient to put mid-curve domestic issuance on a pricing par with bank loans and thus entice more issuers to market.
The specificity of Inter-American Development Bank (IADB)’s inaugural Australian dollar EYE – education, youth and employment – bond was key to its robust execution outcome, deal sources say, as local demand increases for high-quality and clearly defined use of proceeds for social-bond issuance. IADB has only previously issued public benchmark EYE bonds in US dollars.
The Australian Business Securitisation Fund (ABSF) passed both houses of parliament on 3 April and received royal assent on 5 April. The initiative – which directs the Australian Office of Financial Management (AOFM) to increase the availability of finance to SMEs – now enters the final stages of planning before becoming operational on 1 July 2019.
Edith Cowan University (ECU)’s debut bond deal marks a shift in the landscape for universities that have until now been largely reliant on treasury corporations for funding. Diversification and establishing a presence in capital markets was ECU’s focus as it positions for commercial development, and deal sources say investor demand bodes well for ECU’s future capital-markets strategy.
Suncorp-Metway (Suncorp)’s first 144A/Reg S deal since November 2017 attracted a meaningful oversubscription and significant price tightening, despite competing for demand in a busy market. Furthermore, leads and issuer say the level of participation from Asian accounts was a positive.
Australian Finance Group (AFG) priced its largest-ever residential mortgage-backed securities (RMBS) deal on 5 April. The issuer intends to leverage what it believes is a unique product proposition in the Australian market, as a broker and lender, to reach a more diverse investor base as its funding requirement rises.