Goodman looks offshore to sell corporate bonds

Philip Bayley
Reuters reported that Goodman Group (rated BBB) intends to sell bonds in Europe or the US within the next six months, to partially refinance debt maturing in 2013. CEO, Greg Goodman, was reported as saying the domestic corporate bond market was not under consideration because it is not deep enough to absorb debt with a term to maturity of five to seven years.

This is a surprising comment given that the average term to maturity for all bonds issued this year has lengthened to 4.9 years from 4.0 years, last year. All issuers are now looking to go longer.

Moreover, competitor, Dexus Property Group (BBB+), issued seven-year bonds in April and SPI Australia Electricity & Gas Pty Ltd., (A-) issued seven-year bonds in March. Investors too, have been expressing a desire for longer-dated bonds.

The comment also indicates that the, now more easily accessible, listed corporate bond market is also not being considered. Yet Goodman Group is one of Australia's largest listed entities with a market capitalisation of more than A$3.7 billion. It no doubt has an investor base, within which there may well be a surprising level of demand for its debt.

As an owner, developer and manager of industrial and business property globally, Goodman Group is likely to have attracted considerable investment from self-managed super funds. And it is self-managed superannuation funds that, to date, have had little opportunity to invest in corporate bonds.  

Goodman Group did not specify how much it expects to raise from an international bond issue but interest among its own shareholders should be tested first. It may be that shareholder interest will be insufficient to meet the full debt requirement, but the term to maturity is unlikely to be a problem. One of the significant advantages of listed bonds is that they can be liquidated in a transparent market, in need.

It also seems ironic that Greg Goodman's comments come after Goodman (NZ) Limited CEO, John Dakin, was recently reported in New Zealand media as saying that Goodman Property Trust (of which Goodman (NZ) is the manager) could eventually source half its debt from the local (listed) bond market. He also expects that other New Zealand real estate investment trusts (REITS) with NZ$1.7 billion of debt falling due by the end of 2011, may well do the same.
Dakin's comments follow a successful five-year bond issue in December.