News
The sole lead manager on the recent return to Australian dollar issuance by Qantas Airways (Qantas) says the issuer's first domestic market deal for 10 years was based on demand for the issuer's credit among a small group of investors. However, the response to the transaction – including post-deal feedback – suggests the airline could find appetite for a more widely-distributed deal.
Another holiday week in Australia and New Zealand kept deal flow suppressed, with only four transactions priced. The most significant deal, which also opened the week, was Qantas's return to the domestic market with its first transaction in a decade.
Australian Rail Track Corporation (ARTC) (Aa2) priced a new three-year fixed and floating rate note issue in the domestic market on April 23. The new issue is ARTC's first domestic transaction since its A$100 million (US$102.66 million) tap to its 2014 floating rate note (FRN) in December 2011, which came to market shortly after the line was issued with a volume of A$200 million earlier that same month. Joint lead managers on the forthcoming deal are ANZ and Commonwealth Bank.
On April 23, Asian Development Bank (ADB) (AAA/Aaa/AAA) priced an increase of its July 2017 Kauri line. The tap is the second increase to the line, which was introduced in July 2012 at a volume of NZ$250 million (US$209.7 million) with pricing of 56.2 basis points over New Zealand government bonds (NZGB). The line saw its first tap in January 2013, when ADB added NZ$400 million at 58.7 basis points over NZGB.
Deal flow in Australia and New Zealand slowed to a virtual halt for the third week in April. However, momentum in Australia's nonconforming residential mortgage-backed securities (RMBS) market continued with pricing of Pepper Australia's deal on April 12, shortly after Liberty Financial priced its second nonconforming RMBS deal of 2013 late last week.
The entry of New Zealand government bonds (NZGBs) to the Citi World Government Bond Index (WGBI) – which analysts believe would significantly increase the market's profile with global investors – is a somewhat more distant prospect that recent reports suggest. A substantial quantity of NZGBs is held by official institutions in New Zealand, removing them from outstanding volumes for index purposes and thus keeping the market below the inclusion threshold.
Suncorp-Metway (Suncorp) finalised the margin on Australia's first tier two deal to feature explicit write-down features on April 17. The issuer says the use of a convertible structure did not eliminate institutional demand, but also acknowledges wholesale buyers are still working through the consequences of new tier-to instruments.
Suncorp-Metway (Suncorp) finalised the margin on Australia's first tier two deal to feature explicit write-down features on April 17, announcing the deal will pay 285 basis points over bank bill swap rate (BBSW) or the tight end of a 25 basis point marketing range. Under new regulatory rules tier two capital must include explicit loss-absorbency in the event of a non-viability trigger, which can be offered in the form of a write off or conversion to equity. Suncorp has elected to make its notes convertible.
Market participants are divided over whether demand and supply dynamics in the Australian nonconforming residential mortgage-backed securities (RMBS) market will continue to allow deal prints at the same frequency as they have emerged in recent weeks. Two new nonconforming deals have priced in April following the reopening of the market in March, and recent demand for the product has been robust.