Telstra limps through domestic market

Telstra (rated A) finally managed to sell bonds in the domestic market last week, after failing to raise A$500 million for ten years, at 150 basis points over swap, in November.

On Thursday last week the telco managed to raise A$150 million, for ten years, at 200 bps over swap.

Some major corporate news was brewing at Telstra, though not disclosed until the weekend, with agreement announced on Sunday for the sale of part of the company's network, and customer base, to the Australian government's new broadband company.

Telstra is the first true corporate to sell debt in the Australian market since AMP Shopping Centre Fund raised A$200 million for five years in April, and takes true corporate issuance to 4.3 per cent of total year to date issuance. This is better than the 3.5 per cent proportion achieved last year.

Moody's affirmed the 'A2/P-1' long- and short-term ratings assigned to Telstra the next day. The ratings were placed on review for possible downgrade in September 2009, following the announcement by the government of legislation that could, if enabled, lead to the full structural or functional separation of Telstra.

Now, nine months later, Moody's has halted the review, recognising the lapse of a significant amount of time since the threat of such a separation emerged, together with the uncertainty over the timing of such a separation and the eventual terms of it, if and when it proceeds.

A negative outlook was assigned to reflect the risk that either the legislation may be passed at some point in the future or that Telstra NBN Co are able to arrive at a negotiated settlement that would lead to or have a similar effect.