Australian Westpac breaks breach of obligations with $ 2.8 billion deal
The Westpac Banking Group (WBC.AX) on Tuesday reopened the bond market taps of major Australian banks for the first time in more than a year, with a $ 2.75 billion deal that also marked their first use of a non-USD Libor benchmark rate to price the debt.
Investors gobbled up Westpac’s first senior bond issue since January last year, allowing the country’s second-largest lender to pay just 60 basis points on Treasuries for $ 1 billion in 10-year debt , a 25% reduction from the 80 points he paid last year. .
A tranche of $ 300 million floating rate bonds maturing in five years was priced at 52 basis points spread over the Guaranteed Overnight Funding Rate (SOFR) – the first time any of the The “big four” Australian lenders used the Libor replacement for their transactions. .
Large Australian banks are overflowing with liquidity and have ditched the senior onshore and offshore markets since the Reserve Bank of Australia (RBA) introduced the Term Finance Facility (TFF) in March 2020, which costs just 0.10 %, to guarantee access to liquidity up to the COVID-19 pandemic.
“There has been a long hiatus since we saw the big banks entering the term finance markets given their access to central bank TFFs and the substantial increase in deposits,” said Allan O’Sullivan, responsible for syndication of debt capital markets at Westpac.
“It is positive that investors are seeing a trade from them again on their screens.”
Citigroup, Bank of America, Morgan Stanley, RBC Capital Markets and Westpac managed the issue, which was priced in New York on Tuesday afternoon and also included $ 1.45 billion in 5-year bonds paying 40 points basic versus treasury bills, according to managers.
“An extremely strong result for Westpac,” said Ian Campbell, head of debt capital markets at Citigroup in Australia and New Zealand. “Trading shines even brighter given the all-time tight spreads.”
The bond received “really encouraging support from global USD investors, many of whom had not had the chance to purchase AA-rated senior unsecured opco paper for more than 14 months from Australia’s main banking sector. “, he added.
Australia’s big banks have yet to fully deploy the massive A $ 200 billion ($ 155.2 billion) funding facility, but it expires in June and repayments begin in 2023.
The Australian and New Zealand banking group (ANZ.AX), the country’s third-largest lender, is also expected to issue senior unsecured bonds in the coming weeks.
The Libor (London Interbank Offered Rate) is replaced by rates compiled by central banks after lenders were fined billions of dollars for attempting to rig the benchmark rate for their own gain in 2012.
The SOFR is published by the Federal Reserve of New York to be used as a benchmark for derivatives and debt transactions in US dollars.
In March, UK financial regulators called for a formal halt to nearly all Libor rates from the end of this year, putting pressure on markets to accelerate the change in used interest rates to $ 260 trillion. contracts in the world. Read more
At the end of 2019, Westpac’s largest Commonwealth counterpart bank (CBA.AX) issued the country’s first public operation that did not use the local benchmark rate equivalent to LIBOR, the banknote exchange rate of bank (BBSW). [https://reut.rs/2Tbo2gF]
(1 USD = 1.2890 Australian dollars)
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