Domestic corporate bonds lacklustre in April

Philip Bayley
April finished on a lacklustre note for the domestic corporate bond market. With the month seeing maturities of more than A$8.7 billion, issuance of just $8.85 billion was barely enough to achieve positive net issuance.



Nevertheless, the SSA-dominated issuance last week (sovereigns, supranational and agencies) was sufficient to ensure a positive net issuance result.



Bank Nederlandse Gemeenten (rated AA+), Nederlandse Waterschapsbank (AA+) and International Finance Corporation (AAA) all added to existing lines, while FMS Wertmanagement (AAA) opened a new four-year line. The highlight of the week was a $200 million, three-year floating rate note issue from Heritage Bank (BBB+), priced at 115 basis points over bank bills.



Heritage Bank has $200 million of FRNs maturing in November. The notes were issued two years earlier and priced at 105 bps over.



FMS Wertmanagement sold $300 million of four-year bonds, priced at 61.25 bps over commonwealth government securities, to yield just 2.595 per cent per annum.



BNG, NWB and IFC each added $50 million to their 2025 lines, to take outstandings to $625 million, $200 million and $800 million, respectively.



May began with Inter-American Development Bank adding $100 million to its October 2025 line on Friday. Opened only the week before, the increase priced at CGS plus 53.25 bps, taking the total outstanding to $300 million.

Offshore, Charter Hall Retail REIT (real estate investment trust) followed New Zealand's Goodman Property Trust, which went to the traditional US private placement market the week before. While Goodman Property Trust raised a total of US$120 million at an average yield of 3.59 per cent, and with maturities ranging from ten to 15 years, Charter Hall Retail REIT opted for a simple single tranche issue.



Reportedly heavily oversubscribed, the issue was set at US$200 million with a 12-year term to maturity and priced to yield 3.55 per cent per annum. The proceeds were swapped back into A$252 million, at a spread of 194 bps over bank bills.



The issue was undertaken as part of a debt restructuring, which has seen Moody's Investor Service assign a Baa1 rating to the REIT.



This week will see La Trobe Financial meet with investors ahead of a potential RMBS issue, and Energy Partnership Gas (BBB-) will be meeting with investors next week.



La Trobe Financial debuted in the securitisation market in March last year with a $102 million, subprime RMBS issue. Energy Partnership Gas has not been seen in the market since July 2007 and has only issued once without a credit wrap.



In July 2004, EPG (then BBB) sold $135 million of five-year bonds, priced at 67 bps over swap.