Westfield Spinoff Scentre Markets First Aussie Bond Since Split

Scentre Group, the Australasia-focused mall operator created from the restructure of Westfield Group and its property trust, is planning to sell its first Australian dollar bond since the spinoff.

The newly-formed entity is marketing at least A$200 million ($186 million) of seven-year notes at a yield of about 120 basis points more than the swap rate, according to a statement from joint sale manager Commonwealth Bank of Australia. The offering follows a four-part deal last month that raised 1.6 billion euros ($2.1 billion) and 400 million pounds ($662 million).

Scentre, established in June after shareholders in the two predecessor companies approved an overhaul proposed by billionaire Frank Lowy, said yesterday that it’s open to new housing developments and mall purchases to boost returns. The bond offering comes amid a dearth of issues from non-financial corporate borrowers in Australia, with reporting season blackout periods and summer holidays in Northern hemisphere markets both contributing to the lull.

“Scentre still possesses a strong portfolio of assets in good locations after the restructure,” said Raymond Lee, a portfolio manager at Kapstream Capital Pty in Sydney. “The pricing on the deal does look tight, but there’s been a lack of corporate primary deals and that could provide some technical support for the issue.”

Issuance Lull

Scentre’s offering is the first such transaction from a non-financial company since Transpower New Zealand Ltd. sold A$150 million of seven-year notes on July 30, according to data compiled by Bloomberg. The previous such deal was on June 26 from QPH Finance Co., the funding entity for the group that manages and develops the Port of Brisbane.

Following its transformation, 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 sale last month was the largest by an Australian borrower in the European common currency on record, outside the banking and mining industries. The company said at the time that the funding would be used to help refinance A$5 billion of bridging facilities established for the spinoff.

Scentre has A$1.08 billion of existing Australian-dollar denominated bonds which were issued before the restructuring, Bloomberg-compiled data show.

The company’s comparable net operating income grew 2.3 percent in the six months to June 30 and it predicted funds from operations of 10.88 Australian cents a share in the second half, according to a statement yesterday.

Scentre is rated A1 by Moody’s Investors Service, the fifth-highest credit ranking, and A at Standard & Poor’s, the equivalent of one step lower.

Its latest bond sale is expected to price by tomorrow and is being managed by Australia & New Zealand Banking Group Ltd., CBA, National Australia Bank Ltd. and Westpac Banking Corp., according to today’s statement.

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