TCorp: Funding growth and sustainability bonds

Fiona Trigona, head of funding and balance sheet at New South Wales Treasury Corporation (TCorp) in Sydney, tells KangaNews about the agency’s increased funding requirement, its debut sustainability bond and the market reception for its first sustainability bond programme annual report.

TCorp’s funding requirement went up substantially in the 2019/20 budget and it has come to market frequently already this financial year. What is the overall strategy for filling the funding requirement when it comes to target maturities and use of syndication?

This financial year, we informed the market we would be issuing mostly through tenders, syndication and, to a lesser extent, reverse enquiry. To fund part of this year’s programme, we issued a A$1.75 billion (US$1.2 billion) February 2024 line, a A$2 billion increase to our April 2029 bond, a A$1.25 billion March 2031 bond and, in November, a A$1.8 billion March 2025 sustainability bond.

Reverse enquiry will remain a tool for us over the next year. Demand drives our issuance method. For example, some investors prefer reverse enquiry to get allocation to the volume of bonds they require. They do not always receive the allocation they are seeking through syndications or tenders.

TCorp clients’ borrowing requirements still drive the timing of our issuance, even though we can prefund. We still intend to issue across the curve but will look for opportunities to further lengthen our issuance.

How much demand is there for longer-dated TCorp bonds?

It’s mixed. We have seen interest from Japan and Europe recently, but most is from the domestic base.

Issuance is still driven by the ability to achieve funding competitive with our domestic curve.

What kind of conversations have you had with investors about the increased issuance task? The market mood feels different from the last time some of the states were issuing a lot more debt. There is less negative focus on states’ debt levels.

Investors are certainly very much aware that the increased borrowing target for TCorp is driven by the infrastructure investment on which the government of New South Wales (NSW) has embarked. It has increased its infrastructure investment for the next four years, taking the total to A$97 billion.

Investors and the rating agencies are comfortable with the increased funding task if the investment is economically productive.

TCorp added a benchmark sustainability bond line to its profile in 2019, bringing its total outstanding green, social and sustainability (GSS) bond issuance to A$3.6 billion. Can you provide some more colour on the issuance strategy when it comes to adding new GSS lines versus building liquidity in either or both of the two existing types of GSS bonds?

We have informed the market we are not looking at increasing our green-bond line this financial year.

But we have said we are treating our new sustainability bond differently. We have asked our panel banks to make prices in the new bond, and over time we will look at increasing the line, either via tender or syndicated tap. We are not looking at a reverse enquiry at this stage because we want more secondary-market liquidity in this line.

How much capacity do you have to issue in GSS format, and to what extent has the change from green bonds to sustainability bonds increased capacity?

We have a pool of assets earmarked, so we have further capacity to increase the existing sustainability bond or issue a new GSS bond. We’ll be working with the NSW Sustainability Committee to identify further assets to be included in the pool. This will ensure we have the flexibility to issue and increase issuance in the future.

Do you plan to continue issuing both types of bond and potentially social bonds, too or will all future issuance be labelled ‘sustainability’?

Again, investor demand will drive it. We still have green and social assets so we could potentially issue a social bond or another green bond – or it could be a sustainability bond.

The success of our sustainability bond last year has given us a lot of confidence about issuing in this format going forward.

How have specialist and mainstream investors responded to TCorp’s sustainability reporting?

We released our first annual report in November last year. The feedback was extremely positive. Investors were impressed with the comprehensive nature of the report and we have assured the market that this is the kind of reporting it can expect in the future.

We are committed to complying with all relevant global standards when it comes to reporting.