Asia Roars to Front of Line for Australian Greenback Bonds

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  • Dollar bond issuance by Aussie companies has climbed 57%
  • Commercial lenders are doing bigger transactions offshore

Greenback bond deals from Australia these days are getting going before U.S. and European investors have even got their shoes on.

Asian hedge funds, insurers and banks are now among the first ports of call for Aussie companies, which are increasingly willing to start taking orders for dollar-denominated transactions in Hong Kong and Singapore business hours instead of waiting for New York to wake up, according to sale managers. That’s allowing them to get a head start in building bigger deals and also enabling them to tap into a growing pool of funds that’s hungry for extra yield.

The Asian market is “now very much at the front of the queue” in the minds of Australian issuers, said Hamish Kelly, HSBC Holdings Plc’s head of global banking in Sydney. While keeping the books open longer on transactions may increase execution risk, that’s usually outweighed by the benefits of attracting a wider range of investors, said Kelly, whose company is Australia’s No. 3 ranked manager of overseas bond deals this year.

Greenback bond issuance from Australia has increased to $43 billion this year, up 57 percent versus the same period in 2015, data compiled by Bloomberg showed. Commercial banks have led the way in doing ever-larger transactions, with Westpac Banking Corp. this month raising $5 billion in a single five-part offering, while National Australia Bank Ltd. did a $4 billion deal in July. Commonwealth Bank of Australia, the nation’s largest lender by market capitalization, this week priced $3.3 billion of U.S. currency securities.

Appetite from Asia “has been phenomenal of late,” said Chad Karpes, who heads the Australian debt capital markets team at Bank of America Merrill Lynch, the second-biggest manager of offshore bond sales from Down Under this year. “During recent years the Australian banks have seen increased liquidity out of Asia and from a broad investor base.”

While Australia’s banks have been at the vanguard of tapping Asian investment, some non-financial corporate borrowers have also shown their willingness to follow their lead. The biggest non-bank dollar deal this year out of Australia has been from Sydney Airport, which sold $900 million of 10-year paper in April, and that transaction was announced during the Asian day.

Woodside Petroleum Ltd. is another firm considering additional U.S. dollar issuance, according to a person familiar with the matter who is not authorized to speak publicly and asked not to be identified. Australia’s second-largest oil and gas company is scheduled to meet with investors in Australia and Asia this week, with updates for U.S.-based buyers next week, the person said. The firm sold $200 million of six-year floating-rate notes in July.

Accepting orders in the Asian working day means that “upon the U.S. open, the book will have already garnered reasonable momentum through the Asia session and from a healthy spectrum of Asian accounts,” said Karpes. “This will serve to enhance the dynamic of the orderbook.”