Asciano debuts with a rare ten-year bond

The highlight in the debt capital market last week was a ten-year bond issue from market debutant, Asciano Limited (rated BBB). Asciano sold A$350 million of bonds, priced at a margin of 215 basis points over swap.



This is the first ten-year bond issue from a BBB category issuer since the Queensland toll road operator, Sun Group Finance (BBB+) raised $200 million at a margin of 190 bps over bank bills in December.



Such ten-year issuance is rare and you need to go back to July 2010 to find the next example. APT Pipelines Limited (BBB) sold $300 million of bonds, priced at a margin of 240 bps over swap - which shows that spreads have not contracted a lot in the intervening period.



GPT Wholesale Office Fund also made its market debut. GWOF priced $150 million of seven-year bonds, at 135 bps over swap. This is actually two bps wide of where AMP Wholesale Office Fund priced its $300 million seven-year issue in September.



The local branch of BNP Paribas (A+) returned to the market after an absence of exactly one year. In May last year the bank raised just $75 million for 18 months, priced at 63 bps over bank bills.

This time around a more substantial funding requirement was met, with $425 million of floating-rate notes and $225 million of fixed-rate notes sold with a term to maturity of five years. The notes were priced at 110 bps over bank bills/swap.



Inter-American Development Bank (AAA), Oesterreichische Kontrollbank (AA+) and Export Development Canada (AAA) represented the SSA (supranational, sovereign and agency) sector last week.



IADB added $200 million to its February 2020 line. The increase, priced at 47.7 bps over commonwealth government securities, takes the size of the line to $1.25 billion.



Oesterreichische Kontrollbank's August 2025 line now stands at $275 million, after a $75 million tap, priced at CGS plus 61.7 bps, and EDC sold $350 million of four-year bonds at a spread of 51 bps over CGS.



Staying in the SSA sector, L-Bank (AAA) made its Kauri debut with a NZ$250 million issue of four-year bonds. The bonds were priced at 37 bps over mid-swaps to yield 3.92 per cent.



Bank of Queensland formally advised the ASX of its intention to undertake a wholesale additional tier one capital raising. The announcement followed meetings with institutional investors earlier in the week.



The bank said it was hoping to raise around $150 million, from an issue of notes that will be callable after five years and will mandatorily convert to equity after seven years, if not called. The notes will pay a floating rate coupon, with the credit spread over the bank bill rate to be determined in a book build.



On Friday, it priced a $150 million issue at 435 bps over six month bank bills.

At this level there is no pricing advantage over the 400 bps and a six-year non-call period achieved by peer, Bendigo and Adelaide Bank, in the retail market two weeks earlier. The size of the issue suggests that there was not overwhelming demand.

BOQ's experience may well temper enthusiasm for future issuance of additional tier one capital in the wholesale market. 



Standard & Poor's has assigned a BB+ rating to the notes, taking four notches off the A- senior unsecured rating assigned to Bank of Queensland. S&P will assign intermediate equity credit to the notes.