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RBC Raises A$1.25 Billion With Debut Covered Bond in Australia

Royal Bank of Canada sold A$1.25 billion ($1.13 billion) of three-year floating-rate notes in the lender’s debut covered bond offering in Australia.

Canada’s largest bank by assets priced the South Pacific nation’s first covered debt transaction for 2013 to yield 53 basis points more than the bank bill swap rate, according to an e-mailed statement from the issuer.

Covered bonds, which are backed by the borrower and mortgages that stay on its balance sheet, were last sold in Australia by Suncorp-Metway Ltd. in November, when the Brisbane-based lender priced A$600 million of five-year securities, data compiled by Bloomberg show. Since then, home-loan providers have opted to raise wholesale funds through unsecuritized notes and the revived market for residential mortgage-backed debt.

Bookrunners and joint lead managers for RBC’s transaction were the bank itself, Australia & New Zealand Banking Group Ltd. and National Australia Bank Ltd. Westpac Banking Corp. was also a joint lead manager. Covered notes, a form of issuance that was pioneered in 18th century Prussia, typically carry top credit ratings and tend to be issued at narrower spreads than debt that is not backed by collateral.

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