Telstra bypasses CP market

There was some moderate activity in the domestic credit market last week. GPT Group made the curious announcement that it would stand in the market to buy back its March 2009 bonds in entirety. There is some $325 million of fixed rate bonds and $375 million of FRNs on issue.

GPT recently raised $1 billion of fresh equity from institutional investors and was expecting to raise $550 million from a sale of shares to retail investors, which closed on Friday. GPT had previously said it would apply the proceeds to debt reduction.

But why go to the expense of buying back bonds that will mature in four months anyway? GPT has more than $400 million of longer dated bonds on issue in the domestic market, and with the relatively low coupons and tight credit spreads attaching to these November 2010 and August 2013 bonds, wouldn't it be more cost effective to buy back these?

Telstra announced the completion of an $850 million, three year, syndicated loan facility and also advised that it had raised the equivalent of $348 million earlier in the month via a Japanese Yen private placement under its debt issuance program. The combined proceeds will largely be used to replace commercial paper funding.

Telstra said commercial paper funding was no longer viable due to "reduced availability, wider and erratic margins and a significant increase in the cost of supporting 'standby lines'".