To the surprise of many, the corporate bond market – including the Australian domestic market – rebounded hard and fast from the early days of the COVID-19 crisis with ample liquidity and competitively-priced deal flow. Treasurers share their views on what could be a new paradigm.
CROSSLEY We found there were always markets open during this period and the market choice pretty much came down to price. A few months back the euro market was very accommodative and, more recently, the domestic market has been going gangbusters. We have also continued to receive reverse enquiries from investors around the globe over this period.
We have closed a number of deals in the bank market, and during this entire period we would have had no issue tapping any market at any time. Most banks, local and international, have been open for business and we only encountered one institution that couldn’t provide us with a price. The challenge has been price rather than liquidity.
STORY I agree that liquidity has stood up well so far in 2020. I think in the early days of COVID-19 there was real concern that liquidity would revert back to global financial crisis-type levels, but fortunately this hasn’t been the case. Our key relationship banks were there for us throughout COVID-19. We saw a couple of foreign banks go quiet during COVID-19 but I don’t think this had a material impact on liquidity.
D’ANGELO Our experience was that, within our banking group, only certain foreign banks had limitations, and the top-tier foreign banks were still there for us and lending. It was not a question of liquidity as it was during the financial crisis. Instead, I found pricing was more the focus, including large pricing discrepancies across the banks, domestic and foreign.
We also had the experience that some of the foreign banks had to go back to their ‘motherships’, which meant approval processes took significantly longer. To be fair, domestic banks are also taking longer as many have introduced various other committees into their approval processes.
Overall, the banks have been generally supportive but the length of time to approve and close a transaction has been longer, even for well-known credits.
SCHUBACH Absolutely. The core committee was running at least four times a week and for at least six hours at a time.
CBA takes its position in the fabric of the Australian economy very seriously, and not only from a corporate support perspective but in retail measures as well. There was a focus on supporting businesses that needed funding to keep Australians employed. This was a priority for deployment of capital.
SCHUBACH There is ample liquidity in the local bond market. I can hardly believe it was only a couple of months ago that we were all working so hard to restore confidence that the market would be there to issuers. Now it has all changed so quickly and significant liquidity is available to corporates.