News
Tabcorp Holdings (Tabcorp) had its credit rating downgraded by Standard & Poor's on June 25, with the rating agency's April change to its criteria for assigning equity credit to hybrid instruments a key cause of the move. Tabcorp, which had the equity credit on its A$250 million (US$231.2 million) hybrid lowered to intermediate from high, has had its issuer rating reduced by one notch to BBB- with a stable outlook.
Weaker global conditions continue to weigh on Australasian bond issuance as deal activity has slowed to a virtual standstill especially in credit markets. The only primary transactions to price in the week came from the semi-government and securitisation sectors, although there was a broadly positive response to the New South Wales state budget.
New South Wales Treasury Corporation (TCorp) disclosed a significantly reduced expected funding requirement for its 2013/14 financial year on June 19, a day after a New South Wales (NSW) state budget which continued a theme of state balance sheet consolidation in the face of declining revenues. While some analysts saw little change to the state's outlook following the budget, others suggest asset sales have brought NSW closer to regaining stable status on its triple-A rating.
Deal activity in Australia in the second week of June was limited to the government bond and asset-backed security (ABS) sectors. Three ABS deals priced, totalling A$1.425 billion (US$1.368 billion), while a fourth, for A$500 million, was launched on June 13 by Bendigo and Adelaide Bank. In New Zealand just one deal priced, for a local council.
The first week of June saw deal flow in Australia and New Zealand slow to a virtual halt. Just one issue priced on each side of the Tasman sea in the week - Northern Territory Treasury Corporation priced a syndicated issue and in New Zealand Wellington International Airport priced a dual tranche deal. Elsewhere in the ratings world, state budget announcments by Queensland and South Australia had no impact on S&P ratings or stable outlooks.
Following the budget announcement of the state of South Australia on June 6, the South Australian Government Financing Authority (SAFA) released an indicative funding requirement for 2013/14 of A$6.1 billion (US$5.8 billion).
Following the state budget on June 4, the borrowing authority for Queensland has announced a funding programme of A$12.1 billion (US$11.5 billion) for the 2013/14 financial year. This is A$2 billion less than reported at the mid-year update in January. A$7.1 billion will be raised in term debt, with the remainder funded by short-term debt.
In an exclusive interview with KangaNews following the release of the Queensland budget on June 4, Tim Nicholls, treasurer of Queensland, says tackling revenue undershoots has been a key part of the government's budgetary process. He emphasises the state's commitment to controlling expenses and acknowledges that further debt reduction is needed in order to regain a triple-A rating.