Westfield Spinoff Raises $2.9 Billion in Europe Bond Sale

Scentre Group, the Australasia-focused mall operator created from the restructure of Westfield Group and its property trust, priced the largest-ever European bond deal by an Australian company outside of banks and miners.

The newly-formed entity, created last month after shareholders in the two predecessor companies approved a transformation proposed by billionaire Frank Lowy, raised the equivalent of $2.9 billion. Proceeds from the four-part deal, which included notes denominated in euros and British pounds, will be used to help refinance A$5 billion ($4.7 billion) of bridging facilities established for the transaction.

Scentre is now a self-managed operation focused on properties in Australia and New Zealand, while Westfield Corp. runs the rest of the business and aims to capitalize on faster sales growth in the U.S. and U.K. Scentre’s 1.6 billion-euro ($2.2 billion) bond sale eclipses the 1 billion-euro raisings by Telstra Corp. in 2012 and 2013, and an 800 million-euro issue by Origin Energy Ltd. last year. This week’s sale also raised 400 million pounds ($685 million).

“Australian corporate borrowers have been receiving a good reception offshore,” Michael Bush, the Melbourne-based head of credit research at National Australia Bank Ltd. said by phone. “There’s not a lot of single A rated, non-bank deals going around, so Scentre attracted healthy demand and the pricing looks pretty good value from the issuer’s perspective.”

Brambles, Sydney Airport

Scentre, rated A1 by Moody’s Investors Service, sold 600 million euros of 10-year 2.25 percent bonds and 600 million euros of six-year 1.5 percent securities, as well as 400 million euros of four-year floating-rate notes with a coupon 65 basis points above the euro interbank offered rate, according to a statement from the company today. The 12-year pound-denominated debentures carry a coupon of 3.875 percent.

Local peers including Brambles Ltd., SGSP Assets Australia Assets Pty and Sydney Airport have also sold bonds in Europe this year as the cost of shifting funds from the common currency into Aussie dollars has fallen and credit spreads have tightened.

All tranches priced at the tight end of guidance, according to Kate Stewart, the Sydney-based head of debt capital markets in Australia at BNP Paribas SA, which managed the sale along with with Barclays Plc, Deutsche Bank AG and HSBC Holdings Plc.

“There was a fantastic turnout at the roadshow and a great response both to the issuer’s profile of an Australian and New Zealand asset book and its rating status,” Stewart said. “Positive buy-side response clearly came through in the deal book. The book is extremely high quality and featured a number of large tickets.”

Scentre’s 10-year bonds were priced to yield 92 basis points more than the swap rate, while the six-year securities were issued at a 72-basis-point spread, BNP said. The four-year floaters were priced to yield 67 basis points more than Euribor and the 12-year pound-denominated notes were sold at 113 basis points more than U.K. gilts, according to the bank.

Moody’s rating for Scentre is its fifth-highest. The company is rated A by Standard & Poor’s, the equivalent of one step lower.

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