Few clearly in the bond queue

Unlike in Australia, investors in New Zealand are enjoying some true corporate issuance at the present time, even if it is all coming from the power companies. There has been much talk in our market about corporate borrowers lining up to issue - with a "flood" of issuance being predicted for the first four months of the year.

But as noted above, there is no sign of it yet. Moreover, no one is willing to provide any details on this flood of issuance, or to name names.

In these circumstances, the best indicator of likely issuance is maturities. If we look at true corporate maturities for 2010 and 2011 (as some issuers may seek to refinance well ahead of their maturing issues), there is A$6.3 billion of such bonds maturing this year and A$6.6 billion next year.

Included in these figures are A$1.4 billion and A$1.3 billion of bonds issued by AREITS which will probably be rolled over. On the other hand, though, A$2.9 billion of the maturities in both years comes from utilities, most of which was credit wrapped. How much of this will be rolled over is not clear.

Leaving these figures aside, there remain some interesting names among those who have bonds maturing this year and next. First up are Fosters and Telstra; both have issues maturing next month.

Fosters (BBB) has a A$300 million bond that was issued four years ago, when the company was rated a notch lower at 'BBB-', priced at 43 bps over swap/bank bills. In addition, its now wholly-owned subsidiary, Southcorp, has a A$100 million March 2010 bond coming due and a $50 million August 2010 bond coming due.

Assuming Foster's wishes to roll over all or some of this debt, a new bond issue would be very well received, as would any increase in the amount sought. However, the same cannot be said for Telstra.

Telstra (A) has a A$500 million bond falling due. Telstra issued the bond ten years ago when it was rated 'AA+' and was able to get the issue away at 35 bps over swap.

Telstra tried to issue A$500 million for ten years in November, priced at just 150 bps over swap. The market wouldn't wear it then, and it won't wear it now, unless Telstra has had a re-think in the meantime.

Coca-Cola Amatil has A$250 million coming due in August. This is the first bond that CCL issued in the domestic market.

It has undertaken two other issues since, but only a A$100 million March 2013 bond remains outstanding. CCL has been a more frequent issuer offshore and just last October raised US$400 million in the US s144A market for five years, at just 95 bps over US Treasuries. This sparked much comment at the time because even our major banks could not fund themselves at that level.

Given CCL's recent 'success' in the s144A market, it may not need to roll over its maturing domestic issue. But if it chooses to do so, the consistently 'A-' rated company will be warmly welcomed.

Another interesting name is Network Rail. The 'AAA'-rated, UK government backed company, has A$850 million of bonds maturing in July.

It's anybody's guess whether it will return to this market. The issue undertaken in July 2005, at just 9 bps over swap, was opportunistic at the time.

As for 2011 maturities, Woolies has A$350 million falling due in March, Santos and Transurban have A$350 million and A$300 million respectively, maturing in September, and Tabcorp and Origin Energy have A$450 million and A$200 million respectively, coming due in October. But more on these another time.