Commitment to investor engagement delivers execution outperformance
It is possible for a corporate issuer, its lead managers and the buy side to come together to produce a satisfactory execution outcome for all sides in the Australian dollar market. Market users laud AusNet Services’ approach, not just to its well-received May deal but over many years.
When market participants believe something is not working optimally in corporate execution the answer typically lies in improved information flow. This is not a failing on any one group’s part but more a reflection of expectations and mutual understanding falling into the cracks of a complex process with multiple moving parts.
Issuers can improve their standing by committing to ongoing investor relations work within and outside the deal process. Australian investors say this is far from standard practice, and some issuer names are frequently mentioned in the context of disappointing information flow and general debt investor engagement.
AusNet is very much at the opposite end of the spectrum. When it returned to the domestic market in May, deal sources credit an outcome that stood out in a sluggish corporate market – A$700 million (US$452.9 million) of 10-year bonds, printed from a book of more than A$1.2 billion at a final price that tightened by 15 basis points from launch – as the product of longstanding investor work by the issuer.
“AusNet is a very experienced, well established and sophisticated borrower,” Gwen Greenberg, Sydney-based executive director, debt capital markets at ANZ – a lead on the deal – told KangaNews after pricing. “It has done a tremendous job cultivating a domestic and international investor base over more than a decade, and this transaction’s result is a testament to that work and to the issuer’s track record of delivering what it promises.”
The critical factor is having a long-term approach. Alastair Watson, AusNet’s head of treasury, comments: “Some issuers seek to get every dollar they can at the cheapest price, which tends to leave a bad taste in some investors’ mouths. It is important to remember that it is not just this deal we are trying to get done – it is this one as well as others into the future.”
This means a commitment of time outside the deal process that then ramps up when the issuer is contemplating a new transaction. Watson explains that AusNet roadshows in the run up to every deal it undertakes, for instance – which is not standard practice for all corporate borrowers. “Given our history of issuance in the Australian market we believe we could likely issue without a roadshow. But it is important to regularly update investors – and the roadshow provides the opportunity to do this,” he explains.
One-on-one meetings are an important part of an AusNet roadshow. Without them, Watson says, investors that prefer to meet outside of a group setting may not have their questions answered and ultimately may bid in smaller volume or even sit out a transaction.
AusNet also makes best efforts to visit the full investor base in a given jurisdiction, with particular importance placed on having open lines of discussion and frank conversations with investors.
This continues into the deal process itself. Watson reveals that AusNet expects to and has received questions from investors even when the execution process is underway, and he reinforces how important the issuer believes it is to make sure investors are aware that they can ask questions at any time.
While buy-side sources are wary of naming bad performers in the investor relations space publicly, there is general agreement that AusNet is among the market leaders – and that being in this group contributes to positive transaction outcomes.
Anthony Kirkham, head of investment management and Australian operations at Western Asset Management, tells KangaNews: “Some issuers clearly get it: they leave us with a good impression and as a result they know that, when they come back to market, we will be there to support them. Others think only in the short term. When investors are uncertain how they will be treated by an issuer through its debt cycle, they will inevitably be less willing to get fully involved in its deals, or they may demand a wider spread.”