Insurer Giants in Americas Court Aussie Firms for Debt DealsBy and
TIAA is keen on Australian efforts to privatize infrastructure
Manulife Financial has accelerated some Australia investments
Australian companies hunting for bespoke debt deals are finding willing lenders in the Americas, where low interest rates have prompted investors to venture further abroad for yield.
With 39 percent of the world’s bonds yielding less than 1 percent, North American insurers thirsty for income are ramping up their lending to companies Down Under looking for longer-dated debt that may be hard to secure in public bond markets. Insurance firms such as TIAA, with $938 billion in assets, are drawn to Australia’s stable economy and opportunities to help fund companies across sectors such as infrastructure and property.
“Even with the challenges in the mining and commodities sectors, the fact it’s still going well speaks well about the underlying resilience of the economy,” said Chris Miller, who helps manage the firm’s private debt portfolio. New York-based TIAA, known for providing insurance to teachers, is “keen on Australia’s efforts to privatize a lot of its infrastructure assets,” especially essential projects such as toll roads and airports, he said.
Miller joins a growing number of asset managers seeking avenues to park their funds as average bond yields around the world slid to 1.5 percent from 2 percent five years ago. Debt issued by firms in Australia, a nation that has enjoyed 26 years of economic growth without a recession, is appealing to life insurance groups with trillions of dollars to deploy as they seek income to match insurance liabilities.
Australian companies have borrowed $5 billion through the U.S. private bond market so far this financial year compared with $3 billion in the same period in 2016, according to Simon Ling, managing director of debt markets at Commonwealth Bank of Australia. New entrants are coming from “all across the board,” he said.
Australia’s largest toll road operator Transurban Group priced A$200 million of notes in the U.S. private bond market in May, while real estate trusts including Growthpoint Properties Australia and Charter Hall have tapped the market this year. Biotechnology group CSL Ltd. also completed a $550 million raising October last year.
North American insurers looking for diversification are keen on Australian corporate debt even as President Donald Trump promises to spend on infrastructure upgrades in the U.S.
Manulife Financial Corp., Canada’s biggest insurer, has quickened the pace of its private debt investments in Australia, according to Ken Cha, a Hong Kong-based senior managing director at Manulife Asset Management.
“We have an Australian dollar balance sheet that we’ve been actively utilizing to make investments,” Cha said. “It’s only been in the last three or four years that that’s really been growing, and it’s growing at a very fast pace.”