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After a three-year issuance hiatus, a brace of Australian firms have completed convertible bond transactions in 2018. While not predicting a full-scale issuance revival, deal sources suggest equity valuations, normalising interest rates and the ongoing hunt for diversification should support renewed interest in the asset class.
Export Development Canada (EDC) (AAA/Aaa) launched a new, minimum A$250 million (US$188.3 million) five-year Kangaroo bond on 15 May. The forthcoming deal has indicative price guidance of 35 basis points area over semi-quarterly swap and 41 basis points area over Australian Commonwealth government bond. Pricing is expected on the day after launch, according to Deutsche Bank, RBC Capital Markets and TD Securities.
On 15 May, Lloyds Banking Group (Lloyds) (BBB+/A3/A+) launched a multi-tranche, benchmark Australian dollar-denominated transaction. The forthcoming deal will be comprised of a 5.5-year tranche in either or both of fixed- and floating rate formats, being marketed at 140 basis points area over swap benchmarks, and a 10-year fixed-rate tranche with indicative price guidance of 185 basis points area over semi-quarterly swap.
On 11 May, following the release of the Western Australian state budget, Western Australian Treasury Corporation (WATC) revealed a borrowing requirement of A$8 billion (US$6 billion) for the 2018/19 financial year. The requirement is comprised of A$5.3 billion of refinancing and A$2.7 billion of new money. According to WATC, its “benchmark bond programme will be the primary source of funding, supplemented by floating-rate notes”.
On 14 May, Province of Québec (Québec) (AA-/Aa2) launched a minimum A$25 million (US$18.9 million) increase to its October 2028 Kangaroo line. The forthcoming transaction has indicative price guidance of 50 basis points area over semi-quarterly swap, equivalent to 55.5 basis points area over Australian Commonwealth government bond.
On 14 May, Resimac launched its Premier Series 2018-1 prime residential mortgage-backed securities (RMBS) transaction. The deal has an indicative total volume equivalent to A$750 million (US$567.1 million), including the US dollar-denominated Class A1 notes.
Northern Territory Treasury Corporation launched a capped A$250 million (US$188.8 million) syndicated increase to April 2028 line on 14 May. The forthcoming deal has indicative price guidance of 61-64 basis points area over EFP. Pricing is expected on the day of launch, according to lead managers ANZ and UBS.
On 14 May, the Australian Office of Financial Management (AOFM) launched a syndicated tap of its June 2039 Treasury bond. The forthcoming transaction will be “of a modest size” and has indicative price guidance of 35-37 basis points over the implied bid yield for the primary 10-year Treasury bond futures contract. Pricing is expected on the day after launch.