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Westpac Sells $2.5 Billion of Notes in Three Parts

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Dec. 2 (Bloomberg) -- Westpac Banking Corp. sold $2.5 billion of notes in the largest U.S. corporate bond offering by a foreign bank in six weeks, according to data compiled by Bloomberg.

The sale includes three-year fixed- and floating-rate debt and five-year fixed-rate notes, Bloomberg data show. It was the largest since Bank of Nova Scotia’s covered-bond offering of the same size on Oct. 21.

Foreign bank issuance in the U.S. tumbled last month as bondholders concerned that Ireland’s debt crisis wouldn’t be contained by an 85 billion euro ($112.4 billion) bailout demanded higher relative yields to hold financial company debt. The extra yield investors demand to own bank bonds instead of benchmarks rose almost twice as much as spreads in the broader corporate bond market, according to Bank of America Merrill Lynch index data.

Foreign companies accounted for $5.4 billion, or 69 percent, of the $7.77 billion of bank issuance in the U.S. last month, compared with 74 percent of $29.4 billion in October, according to data compiled by Bloomberg.

Westpac sold $400 million of three-year floating-rate notes that yield 73 basis points more than the London interbank offered rate; $1.1 billion of three-year fixed-rate securities that pay 103 basis points more than similar-maturity U.S. Treasuries and $1 billion of five-year fixed-rate notes that pay a spread of 135 basis point, Bloomberg data show.

Moody’s Investors Service ranks Westpac Aa1 and Standard & Poor’s grades it AA, one step lower. Goldman Sachs Group Inc. and JPMorgan Chase & Co. managed the sale, Bloomberg data show.

Relative yields on financial debt worldwide expanded 25 basis points last month to 224 basis points, while spreads on all corporate bonds widened 13 to 177, Bank of America Merrill Lynch index data show. Three-month Libor, the rate at which banks lend to each other, is 0.3 percent. A basis point is 0.01 percentage point.

To contact the reporters on this story: Tim Catts in New York at tcatts1@bloomberg.net; Boris Korby in New York at bkorby1@bloomberg.net.

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net.

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