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Pepper Australia (Pepper) priced its second nonconforming residential mortgage-backed securities (RMBS) issue of 2013 on October 16. Pepper Residential Securities Trust No. 11 has an eight-tranche structure with an indicative aggregate volume of A$300 million (US$286 million).
A slow week for Australian bond issuance ended with a flourish. Canadian Imperial Bank of Commerce returned to the market with a new five-year FRN deal, the issuer's first Australian market transaction since July 2011, and Aurizon Network issued the market's largest-ever single-tranche triple-B corporate deal.
On October 18, Aurizon Network (Aurizon) (BBB+/Baa1) – the rail freight group formerly known as QR National – priced its debut transaction in the domestic market. According to KangaNews data this is the largest-ever AUD deal for a triple-B rated corporate borrower in a single tranche. In September 2010, DBNGP Finance raised A$550 million (US$528.7 million) in one visit but this was divided between five-year fixed- and floating-rate pieces.
Canadian Imperial Bank of Commerce (CIBC) (A+/Aa3/AA-, with an issue rating of NR/Aaa/AAA) priced a new covered bond issue on October 17 in the issuer's first Australian market transaction since July 2011 and just the second Kangaroo covered bond deal this year.
The gradual progression of the Australian market, especially the growth in volume available to triple-B issuers, drove Brisbane Airport Corporation (Brisbane Airport) (BBB/Baa2) to refinance A$350 million (US$330.4 million) of credit-wrapped maturities it has falling due in December in its home market. With a substantial capex programme ahead the borrower reveals the potential for repeat issuance, too.
The 2013 Melbourne Mercer Global Pension Index, which surveys and ranks the pension systems of 20 nations, suggests the greatest weakness of the Australian setup is its insufficient incentive or mandate to convert retirement benefits into income streams. Overall, Australia's pension system ranks third among its international peers in the Mercer study, despite scoring just two marks out of 10 in the income-stream area.
On October 11, Brisbane Airport Corporation (Brisbane Airport) (BBB/Baa2) priced a new A$350 million (US$330.4 million) seven-year transaction in its first domestic offering since it priced an A$200 million (US$189.2 million) eight-year transaction in March 2011.
The rates market picked up the slack from a slower week of credit issuance. The New Zealand Debt Management Office priced an upsized 2030-maturity inflation-linked deal, its third-ever deal via syndication, while Queensland Treasury Corporation priced the largest deal in Australia. Corporate activity was focused on New Zealand's retail bond market.
New Zealand's retail bond market, which came back to life in September on the back of a jumbo issue from Westpac New Zealand, continues to see activity. On October 11, Contact Energy (Contact) (BBB) laid out plans to buy back some of its large May 2014 maturity, a day after Wellington International Airport (Wellington Airport) (BBB+) announced plans for a new eight-year deal.
Supranational entities in which the US holds substantial equity stakes insist the ongoing US legislative showdown, which could in a worst-case scenario cause a technical default on US sovereign debt, will not significantly affect their status. The issuers also say their investors have not raised questions about any potential impact of the US situation on supranationals' creditworthiness.