ANZ UBS A K - KangaNews...CommBank says its approach to the syndication process stands the bank in...

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AUSTRALIAN DOMESTIC PRIMARY MARKET HOUSE OF THE YEAR

A consistently high ranking among all sectors of the voter base propelled ANZ to the top spot as Australian Domestic Primary Market House of the Year for 2015. This is the sixth consecutive year in which ANZ has been recognised by the market in

this blue-ribbon category.Although ANZ is not top of KangaNews’s intermediary

league tables in 2015, the bank continues to score highly with primary-house voters. This is because of the breadth of its origination business, which covers the domestic and Kangaroo high-grade markets as well as local credit, and because of market-leading support from the Australian institutional investor base.

In fact, ANZ received almost twice as many votes from local fund managers as any of its peers. Paul White, ANZ’s Sydney-based global head of debt syndicate, says the bank prioritises its relevance to issuer and investor clients as well as continuing to show leadership in every asset class in Australian dollars. “We have a very stable and consistent team facing clients whether it is in origination, syndicate, research, or sales and trading. We work together as one for rates and credit,” White says.

He adds that the bank offers reach beyond the traditional scope of the domestic market – a factor which has become increasingly relevant in recent years. “ANZ differentiates itself by its super-regional strategy, which can be seen in debt capital markets by our leading position in Australian and New Zealand dollars and in Asian markets. This has increased our investor trade flows within the region,” says White.

According to Ron Ross, ANZ’s Sydney-based executive director and head of capital markets, the bank has consistently advanced the value of the Australian market as a whole. He comments: “We work hard at servicing repeat issuers but we equally value first-time and infrequent issuers. We work hard to bring diversification to the local market and over the last three years we have been very successful at this.”

Ross points to a raft of new issuers with debut transactions in Australia facilitated by ANZ in recent years. In the true-corporate sector alone, this list includes BP Capital Markets, ABB Finance Australia, Glencore Australia Holdings, Anglo American, Total Capital International, Holcim Finance Australia, BMW Australia Finance, SAB Miller and Volkswagen Financial Services Australia. ANZ has also been at the forefront of introducing a number of Korean borrowers to Australia.

ANZ

AUSTRALIAN SOVEREIGN/AGENCY HOUSE OF THE YEAR

KangaNews has awarded the Australian Sovereign/Agency House of the Year trophy in six of the years since the awards were first introduced in 2007 – and UBS has been the winner in five of those six. The bank receives consistent support from issuers and

investors in the sector in part because of its uniformly high turnover contribution. It was also close to the top once again in KangaNews’s 2015 league table for syndicated sovereign and semi-government volume – a position it also holds year after year.

Longevity and stability are key reasons for the bank’s ongoing success in the Australian high-grade sector, insists Duncan Haig, managing director and head of FX, rates and credit, Australia at UBS in Sydney. “The market is highly competitive and good global distribution, high-quality research, fast and consistent price making and strong coverage are essential to being a leading player,” he says. “We have been fortunate to have a stable team and to have been able to provide consistent service for a long period of time.”

The ongoing process of market development and renewal drove a need for change in UBS’s sovereign and agency offering in 2015, Haig reveals. “The market’s structure has evolved to become more electronic, requiring greater spend on technology,” he says. “Regulation is also adding expense to market making and therefore efficiency is more important than ever.”

Haig also sees further challenges ahead for the high-grade market, based once again on the regulatory process and cost-of-capital issues. “One of the greatest challenges going forward will be the dealers’ leverage ratio, specifically the impact it has on the repo market and the ability for dealers to hold inventory during times of lower turnover.”

But Haig says he takes some comfort from the fact that there is still solid overall demand for the Australian high-grade sector from reserve managers, asset managers, banks and, increasingly, hedge funds.

He explains: “A significant portion of Australian government debt is held offshore and there will always be ebbs and flows in the demand for Australian dollar fixed income. We see plenty of demand at a price and supply adjusting accordingly. Going into 2016, the below-average level of the Australian dollar should result in greater demand for unhedged assets.”

UBS

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KANGAROO SECONDARY MARKET HOUSE OF THE YEAR

There are just two KangaNews Awards which have both been bestowed in every year since the awards were introduced, in 2007, and have been won by the same institution on every occasion. One of these is the law firm of the year category (see p60), and the

other is Kangaroo Secondary Market House of the Year. This latter category has now been won nine years running by TD Securities (TD).

TD has persevered with its support of the secondary Kangaroo market through the financial crisis and the challenges which have beset bank trading books ever since.

Ward Simondson, vice president and director, fixed-income sales at TD in Singapore, explains that being plugged into flows and aware of emerging demand is critical in the capital-constrained environment in which banks are operating.

“All banks are now working with more restricted balance sheets, which has seen the market move to more of an agency model,” he acknowledges. “It is very important, even though we continue to offer a limited amount of balance sheet, that we have a broad and in-depth understanding of our global investor base. Understanding the different investment patterns helps keep the market functioning smoothly even in times of stress.”

The Kangaroo market is at or close to full maturity, so Simondson says in a secondary-market context it is vital to understand the specific conditions that affect the level of activity of diverse investor sectors.

He explains: “Over the years we have found the various niches come into play at different times. For many years the dominant force was central banks building their Australian dollar reserves, whereas in 2015 there was a much greater domestic investor participation based on value relative to other assets. The critical factor is not so much finding new buyers but a rotation of the investor base.”

As to the future of the secondary market, Kieran Hennessy, Singpaore-based director, fixed-income trading at TD, suspects the return of volatility may force the unwinding of some restrictions on trading books. But he does not foresee a quick return to old norms.

He comments: “The worldwide regulatory direction is to reduce liquidity. Whether this will remain the case in the face of upcoming market dislocations remains to be seen, but the ship will certainly be slow to turn.”

TD Securities

KANGAROO PRIMARY MARKET HOUSE OF THE YEAR

The core sector covered by TD Securities (TD) in the Kangaroo market – issuance from supranational, sovereign and agency (SSA) issuers – may have had a down year for issuance in 2015, but a marginal fall in volume could not stop TD from retaining its crown

as the leading primary-market house across the Kangaroo market. The bank took first place in the KangaNews intermediary league tables for Kangaroo issuance, though only a narrow one when self-led volume is stripped out, and is also the Kangaroo Primary Market House of the Year in the KangaNews Awards.

TD has now won this award four times out of the nine it has been bestowed, the equal most wins by any bank. It is also the most successful primary-market Kangaroo house of recent years, with its category wins coming in 2009, 2012, 2014 and now 2015.

The bank tries to be the best possible conduit between participants on all sides of the market – an approach which Tom Irving, TD’s Singapore-based head of Asia syndicate, believes pays particular dividends when conditions are less conducive.

“Teamwork is a cliché but it is extremely important, especially when market conditions are not obvious,” he explains. “We discuss options with both issuers and investors, then work out how we can marry them together. This doesn’t work when motivations are misaligned, so ensuring our internal focus is aligned is paramount to achieving an outcome for our clients.”

Challenging conditions were par for the course in 2015, says Alf Costanzo, head of origination and syndication, Europe and Asia Pacific at TD in Singapore. The year’s “unpredictable twists and turns” meant flexibility was critical for lead managers.

For instance, Costanzo says: “At the beginning of the year, we felt there would be a large clear window for SSA issuance ahead of Chinese new year. The market instead had to deal with the Swiss National Bank removing the euro-Swiss franc cap, a surprise rate cut by the People’s Bank of China followed up shortly thereafter by the Reserve Bank of Australia, the European Central Bank’s QE programme, and the latest rumblings in Greek politics.”

Irving says TD endeavours to be adaptable in these types of market environments. “We aim to be ahead of trends. However, there are always surprises to which we need to react. As such, it is our role as an adviser to both anticipate and react – and I feel they have equal weighting of importance.”

TD Securities


SYNDICATED LOANHOUSE OF THE YEAR

AUSTRALIAN DOMESTIC SECONDARY MARKET HOUSE OF THE YEAR

Commonwealth Bank of Australia (CommBank) scoops the KangaNews Australian Syndicated Loan House award from three-time winner, ANZ, in 2015, despite not topping syndicated loan league tables. The award is based on the strong support of

corporate borrowers in the KangaNews Awards voting process.CommBank says its approach to the syndication process

stands the bank in good stead with clients. Loretta Venten, general manager, loan markets at CommBank in Melbourne, tells KangaNews that the focus of the syndicated-loan division is developing a deep understanding of its clients and industries while leveraging the team’s strong structuring capabilities to deliver financing solutions.

“In October 2014, CommBank was one of the first banks to introduce the syndicated bank-guarantee structure in the Australasian loan market and led the first facility – for Woolworths,” Venten reveals. “In 2015, CommBank led the first-ever syndicated bank facility placed exclusively with global and domestic insurance companies for an airline – Qantas Airways. This provided our client with access to a new credit market and successfully freed up capacity with major banks while securing reduced all-in pricing at comparable tenor.”

Venten says CommBank’s outlook for 2016 includes a continued focus on regulatory change. “Margins have shown signs of an upward trend since late 2015, primarily due to an increase in bank wholesale-funding costs and the implementation of additional capital requirements. This cost-of-funding pressure, balanced against a backdrop of strong liquidity still being available, will be a focus for the new year.”

A continuing acquisition-financing theme should drive volume. “The past year saw a number of large M&A transactions come to market and we expect this to continue into 2016, particularly given Australian dollar movement. The loan market continues to be liquid with domestic and international market participants looking for new opportunities,” Venten says.

The infrastructure pipeline will also be a key driver of 2016 issuance volume, Venten believes. “Opportunities in this sector will continue to be attractive given the pipeline of privatisations for key infrastructure assets such as AusGrid. Well-structured transactions should continue to be successful for bid consortia expected to come from both on- and offshore investors.”

Commonwealth Bank of Australia

A clear focus on developing the best possible fixed-income operating model to support its presence as a significant player in what has become an increasingly competitive and challenging market environment led Commonwealth Bank of Australia (CommBank)

to take the Australian Domestic Secondary Market House of the Year crown in the 2015 KangaNews Awards. This is the first time CommBank has been awarded this title, after Westpac Institutional Bank, ANZ and UBS scooped it for the first seven years since the award’s inception.

A combination of internal strategic partnerships and high-quality teams working towards the same goals globally has delivered consistent and superior service to the bank’s clients, says Pierre Katerdjian, managing director, global fixed income at CommBank in Sydney. “We are naturally very pleased to see these results,” he says. “Ultimately, we believe we have a leading end-to-end operating model compared with our competitors and this is what has delivered this outcome.”

Trading books have found themselves even more closely monitored – and in many cases constrained – in 2015. Katerdjian notes the extent to which trading books have had to consider and adapt to a range of interconnected challenges – such as reduced availability of capital, heightened regulatory oversight and thinner liquidity. However, despite the fact that oversight in this area has continued to ramp up in recent years, he says CommBank has been able to continue to support the market.

“This environment has clearly had an impact on warehousing capacity and overall appetite to be active in a range of secondary markets on the part of all market participants,” Katerdjian comments. “As well as the alignments within our operating model, we have focused on building strong internal stakeholder engagement and management support to allow us to continue being focused on delivering superior service to our clients.”

Into 2016 and beyond, Katerdjian says CommBank will continue to seek ways to develop its engagement with and support of clients, by focusing on delivering deep industry expertise and insights. “We will continue to focus on lifting the quality of the people in our global teams and enhancing our technology platforms and processes, while ensuring we remain flexible and adaptive to the ongoing changes in external markets and the regulatory environment.”


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DERIVATIVES HOUSE OF THE YEAR

Voting in the KangaNews Awards’ Derivatives House of the Year category followed a similar pattern in 2015 to the response in 2014 – but with a different result. In both years, bond-issuing institutions, especially those in the corporate and

financial-institution sectors, voted quite strongly for National Australia Bank (NAB) as their preferred house, while the investor community returned an equally solid response for Deutsche Bank.

In 2014, the latter of these support bases was the dominant one, so Deutsche Bank took the laurels as the issuer vote was less conclusive. The outcome is reversed in 2015, though, as NAB’s strong backing from the issuer community led to it taking the honours.

When servicing borrower clients, Darren Hooton, general manager, corporate, institutional and specialised businesses at NAB in Sydney, says an awareness of the debt-issuance pipeline is crucial. “We’re actively aware of which clients are considering issuing bonds and we try to be proactive with them about explaining the derivatives impact of what they are aiming to achieve,” he explains. “Lots of corporate clients may only borrow every two or three years, so understanding swaps and the most recent developments in the swap market are very important for them.”

To this end, Hooton says the derivatives business at NAB works very closely with the DCM team on forthcoming transactions. “We get involved in deals from mandate onwards. Our clients are seeking a specific funding outcome – and working with us through the process helps them achieve it.”

The good news for bond issuers – and the bond market overall – is that the worst prognoses of doom around uncleared swap pricing have not come to pass. Hooton explains that while there has been the expected upwards movement in price based on credit adjustments, this has in part been offset by a funding benefit.

The process of reaching a new equilibrium is convoluted and ongoing, though. Hooton explains: “We are still working on the process of educating clients on new variables and their impact on, for instance, 10-year cross-currency swaps. There is still a lot of work to go through even on the bank side, though. We are certainly not yet at the landing point – but I would say that we do at least have a reasonable degree of transparency about where we need to get to.”

National Australia Bank

SECURITISATION HOUSE OF THE YEAR

National Australia Bank (NAB) has now collected a trifecta of consecutive wins as KangaNews’s Securitisation House of the Year – but this does not tell the full story of the bank’s performance in the category.

A number of institutions have held KangaNews house-of-the-year categories for several years running. But in most cases the results have got closer in recent years. NAB, by contrast, has gone from a narrow winner in 2013 to a clear – though not insurmountable – lead in 2015.

Jacqueline Fox, head of securitisation origination at NAB in Melbourne, acknowledges the challenge involved in staying ahead of the pack. However, she says: “There are enduring principles that underpin the sustainable success of any business, and at the heart of this is the customer. Putting the customer at the centre of what we do is paramount for us, and ensuring we regularly test ourselves against this keeps us focused on service.”

NAB also tries to foster a happy and productive team environment. “As a team we have a common purpose, which is well understood, and we support one another to achieve it,” Fox explains. “We endeavour to provide great learning experiences and challenges across the team and, importantly, promote an inclusive culture of shared accountability and ownership.”

Fox points to a trio of NAB-led transactions from 2015 as notable highlights. Macquarie Bank’s A$2 billion (US$1.4 billion) PUMA 2015-1 residential mortgage-backed securities (RMBS) issue in March attracted great volume and significant offshore support – it was also voted KangaNews’s Australian Securitisation Deal of the Year (see p68). Firstmac printed the largest Australian nonbank RMBS since the financial crisis, netting A$1 billion in May. And Pepper Group added the largest nonconforming RMBS since the crisis with a A$550 million equivalent, dual-currency issue in June.

NAB’s performance is even more impressive when put in the context of the challenges faced by Australian securitisers in offshore markets. This has been a key area of business for the bank, and its commitment remains even though Fox acknowledges that it was often hard to make foreign-currency pricing work in 2015. “The ability to support our customers in offshore markets is extremely important – not just for securitised product, but also across debt product more generally including senior unsecured and US private placements,” Fox confirms.

National Australia Bank

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OFFSHORE BOND HOUSE OF THE YEAR

J.P. Morgan retains its title as Offshore Bond House of the Year in the 2015 KangaNews Awards for the fifth consecutive time, cementing its position as one of a select group of institutions, in either Australia or New Zealand, exclusively to hold a category since its inception.

In 2015, global markets saw increased volatility and fluctuations in the cross-currency basis swap. A less positive Australian economic story was beginning to influence investor thinking, too – even though the region continued to be viewed largely favourably as a place to invest.

This backdrop led to notably increased competition, particularly for investment banks. According to Natalie Vanstone, managing director, debt capital markets at J.P. Morgan in Sydney, the bank’s key strengths are threefold. They are the breadth of its global network, its ability to be truly agnostic across public and private markets and its approach when helping clients navigate volatility and to access markets within the best possible windows. “We have never taken our position for granted and we work hard to deliver our clients the best outcome in all markets,” Vanstone insists.

A range of options was available to Australian-origin corporates requiring offshore funding during 2015. The focus, as ever, was on the US 144A and private placement, euro and sterling markets, which provide the greatest depth in longer tenors. J.P Morgan was active in all.

“We’ve supported a number of issuers and we are proud of every transaction, which collectively have helped us to be recognised for this award,” Vanstone tells KangaNews. “It is hard to single out any as each transaction had its own successes and challenges, whether due to market conditions at the time, the ultimate size of the financing task or the sector in which a company operated.”

Looking ahead to 2016, there is a potentially robust pipeline. J.P. Morgan expects to see supply coming from the utility and infrastructure sectors, particularly off the back of the New South Wales government’s privatisation programme.

The bank also anticipates issuers will look to term out and refinance debt in offshore markets. “The US private placement option will remain a core tool in corporate Australia’s capital structure,” Vanstone insists. “For corporates with larger requirements the euro and 144A markets remain relatively competitive to one another.”

J.P. Morgan

US PRIVATE PLACEMENT BOND HOUSE OF THE YEAR

The winner of the inaugural KangaNews US Private Placement (USPP) Bond House of the Year – the ANZ-J.P. Morgan joint venture – attributes its success to a combination of the two banks’ specific strengths.

Natalie Vanstone, managing director, debt capital markets at J.P. Morgan in Sydney, explains: “Our leadership in private-placement issuance is thanks to the breadth and depth of the issuers we’ve supported combined with our deep knowledge of USPP investors’ needs and the types of transactions they find attractive. In terms of the alliance with ANZ, we provide local expertise to our corporate issuers but with the global reach of J.P. Morgan’s platform.”

While the alliance has been in place for close to a decade, it has only really been in the last 4-5 years that the banks have hit top gear in the way in which they coordinate their joint marketing efforts, adds Ron Ross, ANZ’s Sydney-based executive director and head of capital markets. “When you factor in 2015’s record USPP volume of A$10 billion [US$7.2 billion] equivalent issued by Australian corporates, we have had to be on the front foot by definition,” Ross says. “We were very active in our marketing approach, resulting in 10 deals for us as an alliance and thus a very successful year.”

If anything, the appeal of the USPP market as a source of long-term funds for Australian corporate issuers was only enhanced in 2015. The USPP option undoubtedly offers a meaningful value proposition and, at least, a useful complementary funding tool alongside domestic and offshore public markets. Going forward, Ross and Vanstone expect no change in Australian issuers’ USPP deal flow.

“USPPs will continue to play a role due to the flexibility they offer in tenor, the ability to stagger maturities and to issue in more than one currency,” Vanstone insists. “So we will continue to be there for our clients as they seek diversification in their funding sources.”

Issuers will always reward the benefit of a lead manager with both deep local presence and a solid global network. “First-time issuers need to have full confidence in their agent, particularly if the credit is complex or market conditions are volatile. As a repeat issuer you need a bank with undeniably strong relationships with US investors,” Ross suggests.

ANZ-J.P. Morgan joint venture


LAW FIRM OF THE YEAR

Not only has King & Wood Mallesons (KWM) been acclaimed as Law Firm of the Year in the KangaNews Awards an astonishing nine consecutive times, but the voting has never really been close in all this time. A handful of other

firms compete for top spot in votes from corporate borrowers – though KWM likely has the advantage in this sector, too – but the response from offshore issuers and the intermediary sector has never been anything but a landslide for KWM.

Philip Harvey, partner at KWM in Sydney, says the firm is resourced for, and expects to deliver, first-rate work in the debt sector. “We have, by some margin, the largest capital-markets practice in Australia, and it is the hard work of the partners and associates – across debt capital markets, securitisation, derivatives and structured products – that continues to drive our performance,” he explains.

Harvey also pays tribute to the collegiate nature of the Australian industry, a factor which he believes enables a firm like KWM to contribute across all aspects of transactions and market developments. He says: “The support of our clients is vital and something for which we are very grateful, but we are also indebted to all market participants more generally – including issuers, the intermediary community and other service providers – for helping to foster the community spirit we enjoy in the Australian market.”

In terms of 2015 highlights and focuses, Harvey points to the growing diversity of the Australian market – and two ways in particular in which he says KWM has contributed to the emergence of new asset classes.

One is the firm’s ongoing work in the regulatory-capital segment, to assist domestic banks locally and internationally and the international borrowers looking to place these types of instruments. Harvey notes that the asset class comes with challenges that require innovative and creative solutions.

The other is the diversity of issuer types, including a range of debut names in 2015. “It’s been really good to see the increase in diversity of product available in Australia,” Harvey comments. “It is encouraging to see the emergence of a domestic high-yield product and very rewarding that the Kangaroo market continues to go from strength to strength, including some high-profile new names and the continuing commitment of the supranational, sovereign and agency sector.”

King & Wood Mallesons

RATING AGENCY OF THE YEAR

Voting in the KangaNews Awards Rating Agency of the Year category has historically been very close, but in 2015 Moody’s Investors’ Service (Moody’s) was able to nose ahead to capture the title for the second year running. The outcome in 2015 was

the same as the previous year, but on this occasion Moody’s is also able to lay claim to wins, albeit generally narrow ones, across almost all the market’s major voting groups. Voters covering several different sets of issuers, institutional and middle-market investors and intermediaries all put Moody’s on top.

The firm placed a high level of importance on retaining the trophy. Natalie Wells, Australian country manager at Moody’s in Sydney, says the agency is delighted to be recognised for its leading position in the Australian market by KangaNews’s readers. She comments: “We view our achievements in 2015 and 2014 in the context of our ongoing and deep commitment to the Australian market.”

Moody’s attributes 2015’s win to several factors – including service excellence, transparency in its ratings and a leading market outreach in Australia and globally.

Despite its strong position in the on- and offshore spaces, Moody’s continues to work on building out its local presence. “Our coverage of Australian names continued to accelerate in 2015,” Wells reveals. “We are very pleased to maintain a leading level of coverage in both cross-border issuance and the Ausbond index, as well as a strong level of activity in US private placement and issuer-only ratings.”

Purely in the domestic environment, Moody’s continues to be prominent as a provider of deals issued with a single rating in 2015. According to KangaNews data, Moody’s achieved this in several transactions during the year including Shopping Centres Australasia Property Group’s A$175 million (US$126.5 million) and ConnectEast Finance’s A$300 million deals.

It is also in prime position in another sector for which capital-markets issuance continues to grow in relevance. Moody’s is the sole provider of ratings to University of Sydney and Macquarie University. Following debut bond transactions, recent local issuers from the Australian university sector have suggested that the range of credit metrics over which Moody’s operates makes it the leading global rating agency for the tertiary-education sector.

Moody’s Investors Service

Another Standout Year! Thank you again for recognizing Moody’s as rating agency of the year in the KangaNews Awards 2015.This honour reflects our continued commitment to the quality of our ratings and research, customer service, onshore and offshore outreach, and which is only possible because of your support.

We look forward to working with you again in 2016.

For more information visit moodys.com or contact us below:

Ratings Natalie Wells +61.2.9270.8106 [email protected]

Research Christophe Vivien +61.2.9270.8170 [email protected]

Media Hector Lim +61.2.9270.8141 [email protected]

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#1 US Credit Rating Agency:

2012, 2013, 2014, 2015

Most Influential Credit Rating Agency:

2013, 2014, 2015

#1 Asia Credit Rating Agency:

2012, 2013, 2014, 2015

Rating Agency of the Year: 2014, 2015

Another Standout Year! Thank you again for recognizing Moody’s as rating agency of the year in the KangaNews Awards 2015.This honour reflects our continued commitment to the quality of our ratings and research, customer service, onshore and offshore outreach, and which is only possible because of your support.

We look forward to working with you again in 2016.

For more information visit moodys.com or contact us below:

Ratings Natalie Wells +61.2.9270.8106 [email protected]

Research Christophe Vivien +61.2.9270.8170 [email protected]

Media Hector Lim +61.2.9270.8141 [email protected]

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#1 US Credit Rating Agency:

2012, 2013, 2014, 2015

Most Influential Credit Rating Agency:

2013, 2014, 2015

#1 Asia Credit Rating Agency:

2012, 2013, 2014, 2015

Rating Agency of the Year: 2014, 2015


AUSTRALIAN RATES FUND MANAGEMENT HOUSE OF THE YEAR

Western Asset Management (Western Asset)’s ongoing contribution to Australian market development has led the firm to victory in the KangaNews Australian Rates Fund Management House of the Year award for the

second year running. The award recognises the firm which is best engaged with the Australian rates market.

Western Asset scores well with investors, intermediaries, and domestic and Kangaroo supranational, sovereign and agency issuers. Anthony Kirkham, head of investments and Australia and New Zealand operations at Western Asset in Melbourne, explains that the key is the firm’s interaction with banks and issuers, in order to be engaged with opportunities as early as possible.

“We like to have this conversation as it helps not only with primary issuance but because the information we gain as a result helps us to better understand the businesses of the companies we are investing in,” Kirkham comments.

Open dialogue between issuers and investors is vital to the effective functioning of the local capital markets, he continues. “In many deals in which we have participated we have engaged in direct conversations with the issuer and then brought in the banks at a later stage. This way we can also ensure that issuers are being given the right message.”

A challenge for 2015 was the change in credit-spread dynamics across the globe. “The ‘free kick’ from tightening spreads hasn’t been of benefit this year,” Kirkham acknowledges. “Recognising this has led us to maintain an overweight to credit but on a short-dated basis, so we can receive a yield pickup without having to take excessive credit-spread risk. Generally the yield pickup has covered the spread widening.”

Another challenge remains lack of diversity in the Australian market. While Kirkham acknowledges the benefits Kangaroo issuers such as Intel Corporation and Apple have brought, he is concerned that some other, more regular issuers have been lost.

He comments: “It will be interesting to see how this dynamic plays out in 2016 given that supply tends to ebb and flow on refinancing need. The local market remains the most cost-effective option for domestic issuers given challenges around the cross-currency swap – and I don’t think our market is so unfairly priced anyway.”

Western Asset Management

AUSTRALIAN CREDIT FUND MANAGEMENT HOUSE OF THE YEAR

A range of factors gives IFM Investors (IFM) an edge over its peers, propelling it to prime position as the Australian Credit Fund Management House of the Year on the second occasion on which KangaNews has awarded this particular gong. Voters from the

issuer and intermediary sectors appreciate IFM’s engagement with the debt market across asset classes and the firm’s depth of credit insight.

Scott Barker, executive director, debt investments at IFM in Melbourne, points first to the firm’s wealth of experience in the local credit market. “Our flagship debt fund has been open since 1999,” he says. “Our team has been active in the market through the good and bad times and we are seasoned debt investors. We have an amazing team with a fantastic network of contacts across the globe.”

IFM has a long history of investing in infrastructure debt, using this expertise to provide access to a broad range of opportunities in the sector. In the asset-backed space, Barker reveals that IFM has worked with issuers for more than 15 years and supported them in both public-market issues and premarket warehouse facilities. “This provides us with deep insights into both the residential-mortgage and the general consumer-finance markets,” he adds.

As well as having areas of specialisation, IFM’s funds are diversified beyond one or even a few market sectors. “We have the flexibility to seek out areas of good value for our investors,” Barker reveals. “If one area looks rich, say traditional corporate bonds, then we may focus on the bank loan market. Or if we see pricing moving to unattractive levels for residential mortgage-backed securities we may focus more on other forms of asset-backed receivables.”

Although its focus tends to be around the lower end of the investment-grade space, as this is where IFM sees greater returns for its clients, Barker says IFM is welcoming of a strong, diversified corporate bond market. But he adds that a potential challenge lies in how the market manages Australian corporates’ desire to extend bond tenor as they increasingly move away from a reliance on bank debt.

“For us it can be a fine line,” he says. “If the issuer is prepared to pay for tenor we are certainly interested in investing for longer, but we must always ensure our investors are appropriately rewarded for risk.”

IFM Investors

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By working only with like-minded institutional investors who share our commitment to a long-term strategy, IFM Investors’ debt investments have provided income-generated growth over the last 15 years.

With over $3 billion invested via our Specialised Credit Fund strategy, and a global presence, IFM Investors offers you a distinctive debt investment solution.

For more information visit www.ifminvestors.com/debt

WE BRING DEPTH TO DEBT.

Past performance is no indicator of future performance. This information has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person or entity. IFM Investors Pty Ltd recommends that before making any investment decision, each prospective investor should consider whether any investments are appropriate in light of their particular circumstances and refer to the appropriate information memorandum for further information. IFM Investors Pty Ltd ABN 67 107 247 727, AFS Licence No. 284404, CRD No. 162754, SEC File No. 802-75701.156460/0315.

WINNER Australian Credit Fund

Management House of the Year

DebtAd2015_KangaNews_210x280.indd 1 17/12/2015 5:04 pm

As an institutional investor, imagine having access to over 1,500 credit opportunities to carefully tailor your own debt investment needs.

Some investment managers use only the standard agency ratings to access debt investments. But the Specialised Credit Fund uses our own stringent criteria to identify profitable and stable debt investments beyond the composite bond index.

By working only with like-minded institutional investors who share our commitment to a long-term strategy, IFM Investors’ debt investments have provided income-generated growth over the last 15 years.

With over $3 billion invested via our Specialised Credit Fund strategy, and a global presence, IFM Investors offers you a distinctive debt investment solution.

For more information visit www.ifminvestors.com/debt

WE BRING DEPTH TO DEBT.

Past performance is no indicator of future performance. This information has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person or entity. IFM Investors Pty Ltd recommends that before making any investment decision, each prospective investor should consider whether any investments are appropriate in light of their particular circumstances and refer to the appropriate information memorandum for further information. IFM Investors Pty Ltd ABN 67 107 247 727, AFS Licence No. 284404, CRD No. 162754, SEC File No. 802-75701.156460/0315.

WINNER Australian Credit Fund

Management House of the Year

DebtAd2015_KangaNews_210x280.indd 1 17/12/2015 5:04 pm


AUSTRALIAN DOMESTIC FINANCIAL INSTITUTION BOND DEAL OF THE YEAR

AUSTRALIAN SOVEREIGN/AGENCY BOND DEAL OF THE YEAR

Australia’s major banks raised a combined equivalent of A$12.8 billion (US$9.3 billion) in global markets in the first three weeks of July 2015, taking the opportunity to resume funding as a prolonged phase of Greek-debt and Chinese-equity-market induced

global volatility started to subside. One of these transactions scooped KangaNews’s Australian

Domestic Financial Institution Bond Deal of the Year for 2015. The deal clearly impressed market participants with its clean execution at a time when the likelihood of an award-winning deal emerging seemed slim.

Banks accessed a range of funding options after Greece’s Eurozone-backed bailout extension expired on June 30. Issuance was initially concentrated around defensive formats, specifically covered bonds and Australian dollar deals. In the domestic market, Commonwealth Bank of Australia (CommBank) issued A$1.5 billion of floating-rate notes in a transaction which was swiftly followed by Westpac’s award-winning, A$2.9 billion, five-year deal priced on July 17.

In the wake of the transaction, Westpac’s Sydney-based deputy group treasurer, Joanne Dawson, revealed the extent to which robust investor demand drove the domestic return. “We received very clear interest in a domestic senior-unsecured transaction, and saw a window of opportunity to issue,” she confirmed.

Alexander Bischoff, director, global funding at Westpac in Sydney, tells KangaNews a number of factors influenced timing. “We gained some confidence from the European Central Bank’s decision to provide support to Greece’s banking system and its view that Greece would stay in the EU, ending a stalemate of almost three weeks,” Bischoff reveals. “This was an important indication that the broader market backdrop was improving.”

The domestic trade priced by CommBank a few days earlier proved the window was open, Bischoff continues. “There was also a large maturity which was due around the same time, which gave us conviction that there would be demand from investors holding this line.”

It is probably no surprise that the Australian Office of Financial Management (AOFM) is the issuer of KangaNews’s Sovereign/Agency Bond Deal of the Year for 2015: with A$9.5 billion (US$6.9 billion) of syndicated issuance across three deals in the year, the sovereign issuer accounted for

nearly 40 per cent of the sector.Less predictably, the award-winning deal is by some distance

the AOFM’s smallest syndication of the year. Its introduction of a new, 2040 maturity, inflation-linked benchmark was capped at A$1.25 billion where both its new nominal-bond syndications sold at least A$4 billion.

Rob Nicholl, Canberra-based chief executive at the AOFM, says the linker deal’s volume should not obscure the underlying theme of revived demand for inflation-linked product.

“Most of the demand was domestic, and we had been aware that interest for longer-dated linkers was building as we are in regular contact with many of our domestic investors,” Nicholl reveals. “We were certainly of the view going into the transaction that a bigger deal could have been printed, but the cap at A$1.25 billion was a balance between launching a new maturity and retaining sufficient supply for regular auctions during the remainder of the year.”

The AOFM was aiming to issue around A$4 billion of linkers in 2015/16 – though this target was increased to A$4.5 billion following the Australian government’s mid-year fiscal and economic outlook in December 2015. Nicholl says the syndicated deal cap might have been higher had it been planned after this update.

Although the majority of the 2040 debut was distributed domestically, Nicholl says linker demand is spreading. He comments: “One thing that has struck us over the last 18-24 months is the growing offshore interest. We haven’t explicitly responded to this yet, but our offshore investor engagement continues to generate discussion about our linker market and plans to develop it further. To date we feel we have struck the right balance but we are watching this carefully.”

Australian Office of Financial Management

A$1.25BN INFLATION-LINKED AUGUST 2040

JOINT LEAD MANAGERS: DEUTSCHE BANK, UBS, WESTPAC INSTITUTIONAL BANK

Westpac Banking Corporation

A$200M 3.5% JULY 2020 A$2.7BN JULY 2020 FRN

LEAD MANAGER: WESTPAC INSTITUTIONAL BANK

Sources: 1. KangaNews Australian and New Zealand Market Awards 2015. Westpac Institutional Bank is a division of Westpac Banking Corporation (WBC) ABN 33 007 457 141 AFSL 233714 (“Westpac”). WBC is authorised and regulated by the Australian Prudential Regulation Authority in Australia. WBC is authorised in the United Kingdom by the Prudential Regulation Authority. WBC is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. Westpac Europe Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Westpac (NZ Branch) and Westpac New Zealand Ltd are regulated by the Reserve Bank of New Zealand. Westpac operates in other jurisdictions and is authorised and regulated by the Monetary Authority of Singapore, the Hong Kong Monetary Authority, the China Banking Regulatory Commission and the Reserve Bank of India. Westpac operates in the USA as a federally licensed branch, regulated by the Office of the Comptroller of the Currency and is affiliated with a broker dealer registered with the US SEC, Westpac Capital Markets, LLC. Westpac is also registered with the US CFTC as a Swap Dealer, but is neither registered as, nor affiliated with, a Futures Commission Merchant registered with the CFTC. DW_WBC741A1_KANGA

At Westpac Institutional Bank the strength and depth of our relationships are critical to our success. These relationships enable us to manage transactions in a changing market environment and have been vital in securing our latest accolades.

To find out how a relationship with Westpac can benefit you email [email protected]

Opportunityis built on relationships.

Australian Sovereign/Agency Bond Deal of the Year1

Australian Office of Financial Management Joint lead manager

Australian Domestic Financial Institution Bond Deal of the Year1

Westpac Banking Corporation Lead manager

Australian Domestic Corporate Bond Deal of the Year1

BHP Billiton Joint lead manager

Australian Listed Debt Deal of the Year1

Crown Resorts Joint lead manager

Australian Syndicated Loan Deal of the Year1

TPG Telecom Joint mandated lead arranger, underwriter and bookrunner

US Private Placement Bond Deal of the Year1

Transurban Queensland Joint lead agent

Australian Innovative Debt Deal of the Year1

Rabobank Nederland Joint lead manager

New Zealand Domestic Bond Deal of the Year1

Rabobank Nederland New Zealand Branch Joint lead manager

WBC741 Opportunity FPC KANGA FA1.indd 1 18/12/2015 11:00 am

Sources: 1. KangaNews Australian and New Zealand Market Awards 2015. Westpac Institutional Bank is a division of Westpac Banking Corporation (WBC) ABN 33 007 457 141 AFSL 233714 (“Westpac”). WBC is authorised and regulated by the Australian Prudential Regulation Authority in Australia. WBC is authorised in the United Kingdom by the Prudential Regulation Authority. WBC is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. Westpac Europe Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Westpac (NZ Branch) and Westpac New Zealand Ltd are regulated by the Reserve Bank of New Zealand. Westpac operates in other jurisdictions and is authorised and regulated by the Monetary Authority of Singapore, the Hong Kong Monetary Authority, the China Banking Regulatory Commission and the Reserve Bank of India. Westpac operates in the USA as a federally licensed branch, regulated by the Office of the Comptroller of the Currency and is affiliated with a broker dealer registered with the US SEC, Westpac Capital Markets, LLC. Westpac is also registered with the US CFTC as a Swap Dealer, but is neither registered as, nor affiliated with, a Futures Commission Merchant registered with the CFTC. DW_WBC741A1_KANGA

At Westpac Institutional Bank the strength and depth of our relationships are critical to our success. These relationships enable us to manage transactions in a changing market environment and have been vital in securing our latest accolades.

To find out how a relationship with Westpac can benefit you email [email protected]

Opportunityis built on relationships.

Australian Sovereign/Agency Bond Deal of the Year1

Australian Office of Financial Management Joint lead manager

Australian Domestic Financial Institution Bond Deal of the Year1

Westpac Banking Corporation Lead manager

Australian Domestic Corporate Bond Deal of the Year1

BHP Billiton Joint lead manager

Australian Listed Debt Deal of the Year1

Crown Resorts Joint lead manager

Australian Syndicated Loan Deal of the Year1

TPG Telecom Joint mandated lead arranger, underwriter and bookrunner

US Private Placement Bond Deal of the Year1

Transurban Queensland Joint lead agent

Australian Innovative Debt Deal of the Year1

Rabobank Nederland Joint lead manager

New Zealand Domestic Bond Deal of the Year1

Rabobank Nederland New Zealand Branch Joint lead manager

WBC741 Opportunity FPC KANGA FA1.indd 1 18/12/2015 11:00 am


AUSTRALIAN LISTED DEBT DEAL OF THE YEAR

AUSTRALIAN DOMESTIC CORPORATE BOND DEAL OF THE YEAR

A hunger for diversity in the retail market away from bank hybrids caused a groundswell of support for the winner of the Australian Listed Debt Deal of the Year for 2015. Crown Resorts (Crown)’s transaction was the domestic listed market’s only corporate

hybrid bond to be issued between March 2013 and the end of 2015, according to KangaNews data.

As a market-reopening deal, Crown’s hybrid stood a good chance of attracting solid support from investors. Demand for the deal came from retail and wholesale buyers and from domestic and offshore accounts.

Ken Barton, Crown’s Melbourne-based chief financial officer, told KangaNews at the time of pricing that it was important for Asian accounts to be given sufficient time to look at the transaction. But this demand had to be balanced with managing expectations around final deal size. “We felt it was important to send a message to the market that we had received very robust demand – more than we were able to take,” Barton commented.

Australia is not the only potential source of hybrid capital for local corporates. For instance, BHP Billiton placed a US$6.5 billion equivalent deal in October – itself a 2015 KangaNews Awards winner (see p70). However, the nature of the projects for which Crown’s deal proceeds are being used drove the issuer to tap the local market.

“We have been focusing on our development pipeline, which is predominantly around our Australian portfolio, as part of this process,” Barton explained. “With major development projects in Sydney, Melbourne and Perth we have a reasonable funding need and this is more naturally suited to the Australian dollar market.”

The deal was Crown’s second hybrid issued in Australia, following a A$532 million deal launched in September 2012. Barton says the path to execution the second time around was straightforward owing to regular engagement with investors over time. “We have also tapped the domestic market in wholesale format,” he adds. “Regular visits to debt markets help investors better to understand our business direction and funding strategy.”

BHP Billiton Finance (BHP Billiton) has won the KangaNews Australian Domestic Corporate Bond Deal of the Year award for the second time – the first came in 2012 – with its second eligible transaction. Investors and other market participants

backed the March 2015 transaction based on its scale and quality of execution.

Nigel Chadwick, head of treasury at BHP Billiton in Melbourne, says the issuer was confident about Australia’s capacity for another jumbo trade ahead of launch. He tells KangaNews: “We appreciate that the local market has always strongly supported offerings from BHP Billiton and has a very good understanding of the quality of our assets and credit profile. The growth in the local bond market over recent years, and the expressions of interest we had received from our key investors, gave us every confidence the issue would be well supported.”

These were not the only key borrower take-outs from this transaction, though. Chadwick says the company was especially pleased with the support from Asian investors, which took a larger share than anticipated. “The importance of including Asian investors in our marketing activities cannot be underestimated,” he comments.

Having the right banks in place – in this instance National Australia Bank and Westpac Institutional Bank – is equally critical to the success of a transaction. “Participation in our issues is awarded based on the long-term performance of the bank – and not just in the weeks preceding the issue,” Chadwick reveals.

BHP Billiton has now executed two transactions in Australia in recent years, both for A$1 billion, fulfilling a previously stated funding strategy of creating a curve in the Australian dollar market but not necessarily being a frequent issuer.

This approach has served the borrower well and Chadwick suggests it remains a key funding strategy. “We look at all markets each time we consider launching an issue. Pricing and size are two considerations. We are also conscious of building out our curves in each market. We are always open to issuing further debt into the Australian market, but only if doing so fits into our broader objectives and makes sense on a global basis.”

BHP Billiton FinanceA$1BN 3% MARCH 2020

JOINT LEAD MANAGERS: NATIONAL AUSTRALIA BANK, WESTPAC INSTITUTIONAL BANK

Crown ResortsA$630M JULY 2021 CALL HYBRID FRNJOINT LEAD MANAGERS: ANZ, COMMONWEALTH

BANK OF AUSTRALIA, DEUTSCHE BANK, NATIONAL AUSTRALIA BANK, UBS, WESTPAC INSTITUTIONAL BANK

6 7

KANGAROO CREDIT BOND DEAL OF THE YEAR

Every so often, a transaction hits the market that is so obviously an award-winning deal that any discussion and counterargument is effectively futile. Apple’s August Kangaroo debut – at A$2.25 billion (US$1.6 billion) more than twice the size of any post-crisis

corporate deal in Australia – is one such trade.Voting in the KangaNews Awards was beyond clear-cut in

the Kangaroo Corporate Deal of the Year category. Voters might as well have been humming Frank Sinatra songs as they filled in their ballots, such was their fixation on the big Apple.

It is clear that Apple was the deal investors had to own. Even so, market participants credit good execution and clever strategy for achieving such a bonanza.

Apple’s volume may have been partly driven by the fact that the deal was divided into A$400 million four- and A$1.15 billion seven-year fixed-rate pieces and a A$700 million four-year floating rate note. According to data supplied by the lead managers, final books were around A$2.9 billion across all three tranches. KangaNews also understands that there were 207 orders in the final book, including almost 100 investors in the seven-year tranche alone.

This enabled all three tranches to price 5 basis points inside their initial guidance levels, at 65 basis points over semi-quarterly swap, 110 basis points over semi-quarterly swap and 65 basis points over bank bill swap rate respectively.

Rod Everitt, head of Australian dollar syndicate at Deutsche Bank in Sydney, says the scale of demand surprised the leads even though a record-breaking outcome was always on the cards. “We have never executed a corporate deal with the calibre of Apple – a name which has the ability to make heads turn. The deal was expected to be large, but we didn’t expect the eventual outcome – in fact, the book met our expectations even before Asian and European investors had come in,” he says.

The decision to keep the book open overnight before pricing was largely driven by a desire to ensure all accounts were given the opportunity to participate, Everitt adds.

AppleA$400M 2.85% AUGUST 2019

A$700M AUGUST 2019 FRN A$1.15BN 3.7% AUGUST 2022

JOINT LEAD MANAGERS: COMMONWEALTH BANK OF AUSTRALIA, DEUTSCHE BANK,

GOLDMAN SACHS

KANGAROO SUPRANATIONAL, SOVEREIGN AND AGENCY BOND DEAL OF THE YEAR

For the second year running, KangaNews’s Kangaroo Supranational, Sovereign and Agency Bond Deal of the Year is a green bond. In fact, the only two Kangaroo green bonds to be issued by the end of 2015 have both been winners in this KangaNews Awards category.

KfW Bankengruppe (KfW)’s debut in the Australian green-bond market was much more than a ‘me too’ transaction, though. At A$600 million (US$433.8 million), it doubled the size of the earlier Kangaroo green issue and matched the size of Australia’s largest-ever green bond. It also introduced a number of new Australian dollar investors to the green-bond asset class.

KfW itself came to the transaction with realistic goals – which it was eventually able to significantly outperform. Petra Wehlert, head of capital markets at KfW in Frankfurt, tells KangaNews: “Our goal was to have solid placement, gain new investors and, ideally, enhance liquidity in the segment. We targeted minimum volume of A$300 million and were able to double this on the back of diversified interest from around 30 investors.”

Wehlert points to the asset-manager component of the book – 60 per cent, including a bid from Europe – as a highlight of the transaction. Interest in the green-bond asset class also led to an oversubscription, a rarity in the high-grade Kangaroo market where transactions are normally scaled to demand.

KfW’s approach to green-bond distribution is somewhat different from some of its peers, which tend to favour allocations to specialist socially responsible investment (SRI) funds. KfW welcomes SRI demand, but sees green product as something that should be considered – and can be owned – by all investors.

“The main objective is to enhance the attraction of the market segment and to promote the sustainability approach in the Australian dollar market,” Wehlert explains. “We therefore lead a strategic dialogue with investors by focusing on KfW’s green activities and our green-bond approach.”

The green-bond market is clearly still in its infancy in Australia. As a result, although KfW plans to revisit its issuance goals on an ongoing basis it is as yet unwilling to commit to a volume or proportion of green issuance in Kangaroo format.

KfW BankengruppeA$600M 2.4% JULY 2020

GREEN BONDJOINT LEAD MANAGERS: J.P. MORGAN, NOMURA,

RBC CAPITAL MARKETS


AUSTRALIAN SYNDICATED LOAN DEAL OF THE YEAR

AUSTRALIAN SECURITISATION DEAL OF THE YEAR

For several years, Australian corporate bond market participants have been flagging a revival in domestic M&A activity as a potential source of new issuance – especially as corporate capex continues to lag and the infrastructure sector had by the end of 2015 yet to

catch fire as a major contributor to bond deal volume.In 2015, M&A activity finally started to fulfil some of the hopes

placed on it, although so far the capital-markets consequences have in the main been limited to bank funding and some major offshore transactions. One of the latter was APT Pipelines’ award-winning euro and sterling deal (see p69), while the former is perhaps best exemplified by the facility secured by TPG Telecom (TPG) to fund its acquisition of the iiNet Group (iiNet).

TPG regards the acquisition as transformative for its business. The company’s Sydney-based executive chairman and chief executive, David Teoh, said: “iiNet and TPG are highly complementary businesses in terms of geographic presence, market segments and corporate customer base. The combined businesses will provide broadband services to over 1.7 million subscribers and will be well positioned to deliver scale in a National Broadband Network environment.”

The availability of an acquisition-finance facility for such a purchase was a considerable achievement according to deal sources. Broadband is of course ubiquitous in Australian households, but the sector is not a busy one in local capital markets and is therefore not among the most familiar to lenders. The facility itself is not entirely vanilla, but close cooperation between the issuer and its banks – both mandated lead arrangers and syndicate members – saw a good outcome from both a pricing and a risk perspective.

In particular, the financing continued to be available to TPG even as it was forced to increase its bid for iiNet by more than 11 per cent following the emergence of a competing offer. TPG continued to be the iiNet board’s preferred offer – though at A$9.55 (US$6.91) a share instead of the original A$8.60.

TPG has already commenced the process of transitioning its new debt, via a A$300 million institutional share placement opened in mid-November.

Macquarie Bank (Macquarie) is perhaps Australia’s most prominent securitiser. At least two of the major banks have priced larger domestic deals in recent years, and there are a range of other issuers which rely on securitisation for a greater

proportion of their wholesale funding. But arguably no single issuer matches Macquarie’s combination of scale and level of activity. In this context, it is surprising that the bank is a debut winner of KangaNews’s Securitisation Deal of the Year award.

On the other hand, Macquarie’s sophistication in the asset-backed market may act against it. Its two, very active, securitisation programmes provide a steady supply of foreign-currency issuance. But with conditions not conducive to offshore issuance in 2015, Macquarie looked to home shores for its largest-ever Australian dollar residential mortgage-backed securities (RMBS) transaction – and KangaNews Awards voters took notice.

David Ziegler, division director, group treasury at Macquarie in Sydney, says a lot of groundwork was put in place before the A$2 billion (US$1.4 billion) print of PUMA Series 2015-1 (PUMA 2015-1).

“The PUMA 2015-1 volume was pleasing, but not entirely unexpected given the work we had undertaken on our RMBS issuance strategy leading up to the deal,” Ziegler tells KangaNews. “In late 2013 we developed a multi-year RMBS issuance strategy based on our expectations of the key drivers of RMBS supply and investor demand. This set in train a series of RMBS issues starting with our PUMA 2014-1 transaction.”

The long-term strategy has paid dividends. “Pleasingly, things have panned out broadly in line with our expectations and as a result we have raised more than A$8 billion from public and private RMBS issuance in the past two years,” Ziegler adds.

It has not always been easy to find wide demand for prime RMBS, but Ziegler says Macquarie does what it can to engage with the widest possible investor base. “Our recent PUMA public issues offer a number of ‘investor-friendly’ structural features,” he explains. “Investors have responded very positively to these features and the PUMA investor base is as broadly distributed as could be looked for given market conditions.”

TPG TelecomA$1.98BN 2018, 2019 & 2020

MANDATED LEAD ARRANGERS, UNDERWRITERS AND BOOKRUNNERS: ANZ, NATIONAL AUSTRALIA

BANK, WESTPAC INSTITUTIONAL BANK

Macquarie BankA$2BN PUMA SERIES 2015-1

ARRANGER: MACQUARIE BANKJOINT LEAD MANAGERS: ANZ, J.P. MORGAN,

MACQUARIE BANK, NATIONAL AUSTRALIA BANK

6 9

OFFSHORE CORPORATE BOND DEAL OF THE YEAR

OFFSHORE FINANCIAL INSTITUTION BOND DEAL OF THE YEAR

APA Group (APA) scoops the crown for Offshore Corporate Bond Deal of the year via its funding entity, APT Pipelines. The winning deal was part of a three-currency financing conducted over two transactions with the euro and sterling tranches – the

winning transaction – separated from a dual-tranche US dollar deal by just a weekend.

The European deal won because it demonstrated the ongoing validity of the euro market and because the success of the initial transaction created momentum sufficient to roll into the US with a strong tailwind.

The transaction was related to APA’s acquisition of the QCLNG pipeline, Ian Duncan, general manager capital markets at APA in Sydney, tells KangaNews. “We had a US$4 billion syndicated bank facility in place to complete this acquisition but, due to extended pipeline commissioning, we had an opportunity to refinance in the debt capital markets before we’d even drawn upon the bank facility.”

The syndicated bank facility had tenor of more than two years so there was no urgency to fund via global debt capital markets. “We were lucky that euro pricing was competitive when we were ready to go,” Duncan says. “Sterling pricing was not as ‘edgy’ as it had been but all-in pricing was still within our modelled assumptions for the acquisition.”

The vendor sold the pipeline with a minimum 20-year gas transportation agreement in place and APA wanted to match this with long-term financing. Duncan reveals: “We had documentation ready to execute in EMTN and 144A format, always with a view to raising financing in five tenors. We ended up raising seven and 12 years in euros and 15 in sterling – and 10 and 20 years in US dollars – over the course of a weekend.”

Duncan says APA observed some competitive pressure between the euro and the US dollar at deal time. He explains: “Some US investors weren’t entirely convinced we weren’t trading one market off against the other – until we explained that while we were seeking to build curves we were also looking for diversity, not only of tenor but also of markets.”

KangaNews’s Offshore Financial Institution Bond Deal of the Year for 2015 is a ground-breaking transaction. It was not the first Australian-origin bank deal in the offshore Chinese market – though its issuer, ANZ Banking Group (ANZ) also pioneered this avenue –

but it was the first such deal in tier-two format.ANZ’s tier-two actually marked a step forward for the overall

internationalisation of the renminbi market as it was the first new-style tier-two transaction from any non-Chinese bank.

But it has not been rewarded in the KangaNews Awards simply for innovation: following the transaction, ANZ told KangaNews about a pricing outcome which suggests this new issuance option might in time provide the best tier-two economics for Australian banks after their domestic market. Although market capacity is an issue, ANZ’s outcome was for volume which moves the dial on the bank’s tier-two requirement.

The 4.75 per cent yield on the bond swapped back to Australian dollars at around 190 basis points over bank bill swap rate (BBSW). Mostyn Kau, director, global funding at ANZ in Melbourne, confirmed that the cost of funds “compared favourably” with the bank’s existing new-style tier-two issuance in offshore and domestic markets.

Kau said the decision to balance size with price was strategic. “If we had been looking for CNH1 billion [US$155.6 million] we could have achieved it at a tighter price,” he revealed. “But we felt it was particularly important to strike the right balance, given this was ANZ’s first subordinated transaction in the renminbi market and around a quarter of the investors were entirely new to us.”

ANZ’s transaction was also first new-style tier-two Dim Sum bond to feature conversion rather than write-off in the event of non-viability. Kau revealed that investors asked about conversion, but also said they became comfortable relatively quickly. He commented: “There is a potential upside for conversion versus write-off. Conversion is theoretically more beneficial to an investor than write-off and by definition it is certainly no worse.”

ANZ Banking GroupCNY2.5BN 4.75% JANUARY 2020 CALL

TIER-TWOJOINT GLOBAL COORDINATORS: ANZ, HSBC

JOINT LEAD MANAGERS: ANZ, CHINA CONSTRUCTION BANK, INDUSTRIAL AND

COMMERCIAL BANK OF CHINA, HSBC, STANDARD CHARTERED

APT Pipelines€700M 1.375% MARCH 2022€650M 2% MARCH 2027

£600M 3.5% MARCH 2030JOINT LEAD MANAGERS: BNP PARIBAS, HSBC,

NATIONAL AUSTRALIA BANK, RBS


OFFSHORE HYBRID DEAL OF THE YEAR

BHP Billiton Finance (BHP Billiton)’s jumbo hybrid was executed not only in significant volume but also against the backdrop of a less positive commodities story and less accommodative issuance conditions.

Timing was undoubtedly crucial to the success of this US$6.5 billion equivalent trade. The issuer was keen to launch in three markets simultaneously and hence allow the demand between markets to provide the optimal outcome, reveals Nigel Chadwick, BHP Billiton’s Melbourne-based head of treasury.

“It was clearly a challenging time to be launching a deal, but market uncertainty also provided an opportunity to engage directly with our leading investors in Asia, Europe and the US,” he says. “It gave us a good opportunity to tell the BHP Billiton story and showcase the quality of our assets.”

Chadwick suggests the extent of final demand across the range of US dollar, euro and sterling tranches was an upside surprise even for the issuer. “We were certainly hoping for a strong order book to make this transaction worthwhile. But orders of close to US$25 billion, which held firm when pricing tightened, were reflective of the quality of our credit and the level of support it receives in the market,” he comments.

The multicurrency issue demonstrates the extent to which global investors continue to be willing to add risk to the right names even in a troubled sector like resources. “The bond market’s view on the sector is consistent with that of the broader capital markets,” Chadwick acknowledges. “Having said this, there is strong demand for higher-quality credits within the sector, with the weaker credits bearing the brunt of the sell offs. At the end of the day it’s a long-term industry and quality of assets will always shine through.”

Chadwick highlights the importance of the hybrid issue in maintaining BHP Billiton’s credit rating through the cycle. “The issuance of hybrid capital was expected to support balance-sheet strength while also providing valuable flexibility.”

BHP Billiton FinanceUS$1BN 6.25% OCTOBER 2020 CALL €1.25BN 4.75% APRIL 2021 CALL

£600M 6.5% OCTOBER 2022 CALL €750M 5.625% OCTOBER 2024 CALL

US$2.25BN 6.75% OCTOBER 2025 CALLJOINT ACTIVE BOOKRUNNERS: BANK OF AMERICA

MERRILL LYNCH, BARCLAYS, BNP PARIBAS, GOLDMAN SACHS

US PRIVATE PLACEMENT BOND DEAL OF THE YEAR

The KangaNews Awards 2015 received a record voting response from investors in the US private placement (USPP) market – virtually all the significant buyers of Australian-origin USPPs submitted a vote. Their response was, if not quite

unanimous, certainly extremely strong in favour of Transurban Queensland’s jumbo transaction.

The four-tranche deal is not the largest USPP from an Australian issuer but it makes the top five. Transurban Queensland highlights the fact that this most stable of markets is also enjoying a positive evolution – with large volume available to the right names.

Although Australian issuers tend to tap the USPP market for smaller transactions, Richie Hills, Melbourne-based treasurer at Transurban, told KangaNews at the time of pricing that the flexibility of USPP to offer substantial aggregate volume across a range of tranches was especially appealing to a borrower like Transurban Queensland.

Transurban was aware ahead of execution that the USPP market had the potential to offer large volumes, Hills said. He added that the transaction was spun out of a A$1 billion, two-year acquisition facility which had A$350 million remaining to refinance – making this the issuer’s minimum expectation.

But Transurban always had room for an upsize. Hills revealed: “Looking further ahead, to our upcoming maturities over the next couple of years, there was an opportunity to take more volume through this issuance if the additional volume didn’t affect pricing. We were open with investors that we had a minimum size but flexibility on the upside subject to pricing and demand.”

Transurban has been an active issuer in global public markets at corporate level, but USPP works well for its asset-level entities. “USPP investors understand Australian infrastructure,” Hills explained. “So while there aren’t many comparatives against US infrastructure deals, particularly toll roads, we were still confident in USPP investors being able to understand our transaction.”

Transurban QueenslandUS$155M 4.16% SEPTEMBER 2025 US$230M 4.26% SEPTEMBER 2027 US$256M 4.41% SEPTEMBER 2030

A$70M 5.78% SEPTEMBER 2030JOINT LEAD AGENTS: COMMONWEALTH BANK

OF AUSTRALIA, WESTPAC INSTITUTIONAL BANK/BANK OF AMERICA MERRILL LYNCH

7 1

INNOVATIVE DEAL OF THE YEAR

The winner of the inaugural KangaNews Innovative Deal of the Year award encapsulates the further evolution of a product which is both critical to and topical in local and offshore markets.

In June 2015, Rabobank Nederland priced A$700 million (US$506.1 million) of tier-two notes under wholesale documentation in Kangaroo format. In the wake of the transaction’s pricing, Rogier Everwijn, head of capital issuance at Rabobank Nederland in Utrecht, told KangaNews that final books were around A$770 million. The eventual volume was particularly pleasing, Everwijn added. “As the first Kangaroo Basel III compliant tier-two transaction our target was to print benchmark – or A$500 million – size as a minimum.”

The Rabobank Nederland transaction marked a new beginning for the domestic tier-two market, which until this deal’s emergence had been the exclusive domain of Australian issuers since the financial crisis. Tier-two deals are based on the local contractual non-viability framework and the Australian market has grown familiar with tier-two structures that convert to equity.

Rabobank Nederland’s transaction, however, hinted that buyers had reached sufficient level of comfort to take a further leap. The deal was the first of benchmark size in Australia not to incorporate equity conversion in the event of non-viability. Instead the notes use write-off as their non-viability option.

The innovative nature of the deal is enhanced by the fact that it was the first in the Australian market to have bail-in provisions which are subject to a statutory approach to loss absorption. Because only a few jurisdictions – including Canada, Singapore and Australia – have adopted a contractual approach it was always likely that statutory product would have to be tested in Australia for the Kangaroo tier-two market to take wing.

Although the path to consistent issuance is likely to be a long one, following Rabobank Nederland’s debut Australian market participants were optimistic about prospects for further Kangaroo tier-two flow. By the end of 2015 another tier-two Kangaroo had already emerged, in the form of a A$175 million transaction issued by Groupe BPCE.

Rabobank NederlandA$225M 5% JULY 2020 CALL TIER-TWO A$475M JULY 2020 CALL TIER-TWO FRN

JOINT LEAD MANAGERS: NATIONAL AUSTRALIA BANK, NOMURA, UBS, WESTPAC

INSTITUTIONAL BANK

AUSTRALIAN FINANCIAL INSTITUTION ISSUER OF THE YEAR

Commonwealth Bank of Australia (CommBank) retains its position of prominence in the KangaNews Financial Institution Issuer of the Year category in 2015, a title held by the bank in 2014 and also in 2012.

Simon Maidment, the bank’s Sydney-based deputy treasurer, says: “We start with a great business and credit to present to investors and we think our consistent and transparent approach to capital-markets execution is always important. Execution matters, and balancing the right deals for the issuer with the right deals for the market is something which requires our constant attention.”

CommBank responded to renewed global funding-market volatility in 2015. “This backdrop meant managing liquidity to ensure an ability to stay out of markets for periods when cost or execution risk are heightened, and taking a more nimble approach to which markets and when,” Maidment comments. “But the most significant impact of the volatility has been widening credit spreads – something over which we have no control.”

In this context, the bank’s issuance plan is merely a pointer. Maidment says: “Our annual funding strategy is used as a guide rather than as a definitive execution plan. We are always flexible in terms of which markets we will use to achieve our funding target.”

Meanwhile, capital is a critical part of the issuance task. The Financial Stability Board’s total loss-absorbing capacity requirements for global systemically important banks (G-SIBs) continue to evolve, and even though they are not G-SIBs it is widely assumed that Australia’s regulator will ask the local major banks to hold yet more capital. The local market’s acknowledged capacity issues have increased the importance of CommBank’s offshore tier-two issuance, making this an integral part of the bank’s funding programme.

Tier-two has significantly evolved as an asset class in recent months, Maidment adds. He says: “The early offshore Australian bank tier-two trades didn’t create a strong platform for future issuance and it took quite a bit of market education and patience to reopen the euro and US dollar markets for Australian Basel III tier-two. While spreads are wider than the initial trades, the size of the deals and breadth or of investor participation provide a solid platform for future Australian bank tier-two issuance.”



KANGAROO ISSUER OF THE YEAR

Apple

AUSTRALIAN CORPORATE ISSUER OF THE YEAR

Asciano

The KangaNews Awards include categories for issuers of the year specifically so as to capture views on issuer excellence which may not be reflected in transaction flow. A borrower can have first-rate investor relations work, a responsive and innovative

treasury team, superb support of its curve and willingness to respond to reverse enquiry…and rarely if ever print a headline-grabbing deal. KangaNews wants to recognise the efforts of borrowers outside its deal of the year awards, and the issuer categories have the scope to do so.

On the other hand, in some years a deal comes to market that is so significant that the borrower becomes issuer of the year almost by default. So it is with 2015’s Kangaroo market, where a clutch of highly respected names from the supranational, sovereign and agency sector have had to play second fiddle to the story – and issuer – of the year: Apple.

It would be wrong, however, to think that Apple’s win is purely the product of being an eye-catching name. Voters supported the issuer in droves, and market participants credit the professionalism with which Apple blew away the traditional bounds of the Australian corporate market on its way to pricing a record A$2.25 billion (US$1.6 billion) debut in August.

The issuer neither sought a discount from the Australian market nor paid it a premium. In the wake of the Apple deal, Andrew Vonthethoff, portfolio manager at Macquarie Investment Management in Sydney, told KangaNews: “The pricing valuation looked more or less exactly in line with the borrower’s offshore curve at the initial guidance, and at the revised pricing was fair to perhaps a little tighter.”

Vonthethoff ’s view was that the transaction priced in line with the Australian domestic major-bank curve and offered good value versus recent high-grade, longer-dated, non-financial corporate issuance.

Rod Everitt, head of Australian dollar syndicate at Deutsche Bank in Sydney, also credits the issuer’s willingness to keep its books open overnight. “The borrower has a broad global investor base and wanted to ensure those investors which have been supportive in other markets had the ability to participate in Apple’s inaugural Australian dollar deal,” he explained.

This was not a necessary step, Everitt adds – in fact, he told KangaNews that the Apple deal’s book met initial expectations before the Australian close on the day of pricing.

It is especially encouraging that Asciano has received the Australian Corporate Issuer of the Year award in light of the significant challenges the company faced during the second half of 2015, Asciano’s Sydney-based group treasurer, Joanna Wakefield, tells KangaNews. During this time Asciano became

the subject of a takeover battle between Canadian private-equity firm, Brookfield, and local infrastructure company, Qube Logistics.

“We have always tried to keep our bondholders as informed as we possibly can both through visits and calls, and I think they appreciate this fact even more in the current circumstances,” Wakefield comments.

This award recognises the corporate issuing institution which has most impressed the market in terms of its visibility, debt investor-relations approach and the performance of and support for its paper in the open market, and votes are not expected to be cast in light of individual transactions. Even so, undoubtedly another factor in KangaNews readers’ minds would have been the firm’s ground-breaking domestic deal from the first half of 2015.

Asciano priced a A$350 million (US$253.1 million) debut Australian dollar deal – the largest 10-year domestic for a corporate borrower since 2007 – in May. Asciano was assisted to record-breaking heights by its clear and decisive engagement with the local market, fund managers told KangaNews in the wake of the deal’s pricing.

Despite the success of the Asciano 10-year transaction, issuers and investors have continued to struggle to regularly find a mutually convenient meeting point to execute sizeable 10-year deals.

Wakefield says she is disappointed that other issuers did not immediately follow Asciano into the 10-year space, and explains her view on why Asciano succeeded. “In our case investors could see that we were resolute about executing a 10-year, rather than a five- or seven-year, deal. Given our debt maturity profile and the long-dated nature of our assets, 10 years was a sensible place for us to issue.”

As an Australian company, Asciano was keen to support the domestic bond market, Wakefield adds. “To be frank, we never envisaged that we would get this volume away domestically. We always expected that we would have to tap another market to supplement our Australian dollar deal. So, given the outcome, the domestic option was definitely the correct one.”

7 3

AUSTRALIAN SOVEREIGN/AGENCY ISSUER OF THE YEAR

Queensland Treasury Corporation (QTC) wins the Sovereign/Agency Issuer of the Year category in the KangaNews Awards for the first time since 2009, in recognition of the job the funding agency did in 2015 in the face of political and market upheaval.

Since its inception, QTC has maintained a comprehensive investor-engagement programme and prioritises flexibility in its funding programme. These are the factors which QTC believes enabled it to nudge ahead of its peers in 2015.

“We’ve had positive feedback from the market that we manage our engagement well, and this was particularly appreciated during the proposed asset transactions in 2014, and then through the change of government early in 2015,” says Philip Noble, chief executive at QTC in Brisbane. “We are committed to being transparent about our funding activities by providing regular updates and meeting with investors.”

It is also important to maintain flexibility in the funding programme, Noble continues. “While we borrow to meet our clients’ requirements, where possible we try to balance our issuance with demand. I also believe that QTC’s transactions are executed very professionally, with strong support from our fixed-income distribution group.”

Queensland’s change of government early in 2015 saw a shift in focus towards growing the state economy and restructuring its balance sheet to reduce debt. Noble argues the fact that QTC has continued to have good access to global funding speaks for itself in terms of investor sentiment. “We have always been transparent with investors about our proposed borrowing programme, and did not factor in any debt reduction from asset transactions. So in this regard there were minimal changes to forecasts. On the other hand, the balance-sheet efficiencies announced in the 2015/16 state budget were well received by investors.”

Access to a wider investor base continues to be a goal for QTC. Noble says: “Having 144A capability embedded into our programme is one of the key components of this strategy. It has enabled us to diversify the investor books in our primary transactions and increase liquidity for all investors. As an example, North American investors accounted for almost 50 per cent of both the A$1.25 billion [US$904 million] transaction we priced in August and A$1.75 billion of the new 2026 benchmark bond launched in October.”

Queensland Treasury Corporation

NEW ZEALAND ISSUEROF THE YEAR

Auckland Council is a new entrant to the KangaNews Awards’ winners circle in 2015, but its activity in- and outside its domestic market makes it a more-than-deserving victor. The issuer received notable support from local investors, who credit the manner

in which it has gone about managing a growing issuance task, to claim a narrow victory out of a small clutch of standout New Zealand borrowers.

In a market which craves solid credit issuance, Auckland Council is a rare bright spot in the supply environment. The city’s growing population and consequent infrastructure task has forced the council to ramp up its capital-markets presence significantly.

Auckland Council’s chief financial officer, John Bishop, says: “Auckland is going through unprecedented growth which is forecast to continue over the next few decades. This is putting significant pressure on the city’s infrastructure requirement, and as a result the council is expecting to see debt levels increase to approximately NZ$11 billion [US$7.4 billion] by 2025.”

Beyond its local support in the KangaNews Awards, Auckland Council is also expanding its presence as an offshore bond issuer – including a debut Kangaroo transaction in 2015.

Bishop tells KangaNews: “Offshore markets provide the opportunity to diversify our investor base, offer significant volumes and longer tenors, and enhance price tension across our funding sources. We have always seen the Kangaroo market as a natural extension of our New Zealand domestic activity, which was the reason for us establish an Australian dollar programme in early 2013. Auckland Council’s intention is to grow our Kangaroo issuance and to build a curve over the medium term.”

The council has been clear on issuance strategy, specifically its plans to fund via a mix of domestic own-name deals, offshore bonds and its use of the New Zealand Local Government Funding Agency.

In 2016, Bishop says Auckland Council would like to see around 40 per cent of its NZ$1.1 billion funding task raised offshore. He adds: “Given the success of our first Kangaroo issue we believe further opportunities exist in Australian dollars, and this is a market with which we will actively engage. We will also consider private-placement opportunities into Europe – the basis swap has move in the right direction and we could potentially provide a strong diversity play for some long-term European investors.”

Auckland Council


KAURI BONDHOUSE OF THE YEAR

ANZ

NEW ZEALAND DOMESTIC BOND HOUSE OF THE YEAR

ANZ

The Kauri product continually proves to be a solid contributor to New Zealand bond volumes, and 2015 was no exception. Despite there being no Kauri issuance between September 23 and the end of the year, at NZ$6.3 billion (US$4.1 billion) Kauri-market

volume exactly matched the all-time record for the asset class set the previous year.

The winner of the Kauri Bond House of the Year Award in the KangaNews Awards 2015 has been an instrumental player in the ongoing development of the Kauri asset class over a period spanning nearly a decade. ANZ has held a commanding position in the KangaNews Kauri league tables since their inception. The bank tops the cumulative Kauri league table from 2004 to the end of 2015 – with a 44.7 per cent market share. This means total league-table credit of NZ$15.8 billion from 109 deals, or in volume terms two-and-a-half times more transactions than the market’s second-placed player.

Dean Spicer, ANZ’s Wellington-based head of debt capital markets, New Zealand, tells KangaNews that the bank’s focus continues to be the provision of consistent coverage across the Kauri market. “We endeavour to support issuers and investors wherever possible,” Spicer comments. “We have been involved in supporting repeat issuers and we also helped to bring new issuers – such as KfW Bankengruppe [KfW] and L-Bank – to the market in 2015.”

The Kauri market priced some sizeable transactions in 2015, including a second NZ$800 million deal for World Bank and also KfW’s NZ$650 million debut Kauri bond. Issuers say the Kauri market has only increased in relevance in recent times – for instance World Bank not only priced its largest Australasian issue of the year in New Zealand but it also raised more in New Zealand dollars than Australian dollars (see p76).

ANZ says it remains positive regarding continued development in the Kauri bond market, despite the likelihood that there may be some quieter periods in the coming months. “Deal sizes have grown and investors continue to invest in Kauris for the first time, helping drive depth and diversity in the market,” Spicer tells KangaNews. “Unfortunately, drivers for future issuance are mainly outside market participants’ control. There is a natural relative-value proposition which attracts investors to the Kauri market, both in terms of inter- and intra-market relative value.”

Retaining the New Zealand Domestic Bond House of the Year crown in 2015 makes ANZ one of an elite group of institutions which can lay claim to the fact that they have exclusively held a category in the KangaNews Awards since their inauguration. New

Zealand’s domestic market printed similar volume in 2015 to the previous year, but the composition of issuance required ANZ to work hard to stay ahead of the pack.

One notable difference was the increase in banks’ requirements to issue capital instruments, notes Chris O’Neale, director, debt capital markets at ANZ in Wellington. “This promises to be an ongoing theme given the increased demand for capital from the banks,” he says. “Corporate issuance has remained reasonably light, with issues primarily being in the NZ$100-200 million [US$67.4-134.9 million] bracket and this has seen demand, especially from retail investors, continue to swell.”

ANZ’s model, even in this changing environment, remains one of providing issuers and investors with consistent and individualised coverage in order to achieve their goals. “We have built up a number of strong relationships with issuers and investors, and understanding the requirements of both allows us to drive an optimal outcome,” O’Neale adds.

Elsewhere, significant structural changes had an effect on the New Zealand domestic market in 2015, and O’Neale believes these have the potential to drive a reasonably active year for primary issuance in 2016. “The first deal under same-class exemption regulation was completed in 2014 but 2015 certainly saw this type of transaction move into the issuance mainstream,” he tells KangaNews.

ANZ believes same-class exemption will inevitably result in less wholesale-only issuance as corporate issuers use retail programmes to gain access to the broadest possible investor universe.

The solid support of the domestic market by retail investors also means that global volatility, which negatively affected markets intermittently through 2015, may be less pronounced in New Zealand than in other jurisdictions around the world. “Inevitably offshore volatility has a local impact. However, retail-investor support for fixed-rate bonds acts as a release valve – hence the use of the same-class exemption to access these investors,” O’Neale explains. “At the margin, this encourages issuers to focus on the domestic market for their funding requirements.”

7 5

NEW ZEALAND FUND MANAGEMENT HOUSE OF THE YEAR

This is the second year in which the KangaNews Awards have recognised fund managers as stand-out performers. In the New Zealand Fund Manager of the Year category, Accident Compensation Corporation (ACC) takes the trophy with back-to-

back wins. Voters across the New Zealand market – including issuers and intermediaries – credit ACC, and its best-known face to New Zealand debt market participants, Wellington-based fixed-interest manager, Phil Newport, for its willingness to take leadership positions and the quality of its investment analysis and feedback.

In terms of the firm’s overall approach, Nicholas Bagnall, investment manager at ACC in Wellington, tells KangaNews the company has been successful in focusing on areas where it believes it has a natural edge and emphasising the specific places where it is able to add value. “When we deal with other parties in the market we always try to be ethical, open and honest,” Bagnall says. “In the long run this is in our best interests.”

Bagnall adds that investment management in 2015 was characterised by the challenge of matching outcomes from previous periods. “Historically we have enjoyed returns averaging around 10 per cent per year, but we are clearly not going to be able to achieve this in the current environment because two-thirds of our money is in low-yielding fixed interest. Similarly, equity markets are not cheap – the pricing in equity markets clearly reflects where the bond markets have been for some time.”

He continues: “We have the double challenge of having been historically successful and markets having traditionally delivered good returns. This history makes many people expect higher future returns from our investment portfolio than we consider to be realistic from the current starting point.”

He also notes the gradual reduction in investment opportunities driven by mispricing over the last decade and a half. “In the past some very simple investment strategies have produced consistent results, but the performance of these simple investment strategies has been less reliable in recent years. However, I don’t think markets have become more efficient over the last year. If anything, in fixed income greater returns are available from taking credit risk than there were six months ago, so in this respect there has been a clear improvement.”

Accident Compensation Corporation

NEW ZEALAND DOMESTIC BOND DEAL OF THE YEAR

The winner of KangaNews’s New Zealand Domestic Bond Deal of the Year ticks all the boxes one would expect from an award-winning transaction. It featured innovation, awareness of a demand trend, impressive – and upsized – volume and a good

outcome for all stakeholders.It was the attractiveness of the New Zealand market to

offshore buyers that spurred Rabobank Nederland New Zealand Branch (Rabobank New Zealand) to issue its first local deal in listed format. As the first financial institution to execute a deal via this method in New Zealand, the issuer was able to unlock substantial untapped demand.

The deal was launched with indicative size of NZ$200 million (US$134.9 million) but printed double this volume on the back of books that reached NZ$600 million. By being offered in listed format, Rabobank New Zealand’s deal was eligible for marketing to offshore investors without the approved issuer levy.

“In recent years we have observed an increasing allocation to New Zealand dollars on the part of Asian investors,” Jai Anderson, head of long-term funding, Australia and New Zealand at Rabobank in Sydney, told KangaNews in the immediate wake of deal completion. “With this transaction we sought to replicate the success of the distribution of Rabobank’s Australian dollar paper into the Asian region.”

Anderson added that the eventual NZ$400 million volume far exceeded the issuer’s expectations. “We received a warm reception from local retail and institutional investors and from Asian institutional investors – which was exactly what we were looking for.” In fact, more than a third of the transaction’s total volume was sold into Asia.

Despite being the first transaction in a new format, there was no appreciable difference in cost to the issuer in printing via the listed route. Anderson commented: “The notable difference was in volume terms. Our previous deals in New Zealand for a new line have been on average NZ$200-300 million. Indeed, the final book of NZ$600 million is one of the strongest ever for a Rabobank New Zealand transaction.”

Rabobank Nederland New Zealand Branch

NZ$400M 4.592% JUNE 2020JOINT LEAD MANAGERS: ANZ,

WESTPAC INSTITUTIONAL BANK


KAURI BOND DEAL OF THE YEAR

The Kauri market, dominated by supranational, sovereign and agency (SSA) issuers, has been enjoying a renaissance since 2013. Issuance of more than NZ$6 billion (NZ$4 billion) in 2014 was matched in 2015, and the consistent availability of cost-effective

funding in New Zealand also attracted debut SSA issuers in the past year – for the first time since the original Kauri boom of 2007 and 2008.

The most prominent debutant was KfW Bankengruppe (KfW) – already the largest single issuer in the Kangaroo market but a late adopter of the Kauri landscape. However, the German agency’s inaugural transaction was sufficiently successful to be the clear winner of the Kauri Bond Deal of the Year category in the KangaNews Awards 2015.

Petra Wehlert, Frankfurt-based head of capital markets at KfW, admits that it took a long time for the agency to become comfortable with the Kauri market. But, she adds, it never lost sight of the potential to issue in New Zealand.

“In previous years we focused on the Kangaroo market while closely monitoring the development of the Kauri market,” Wehlert reveals. “We recognised an increasing attractiveness of Kauris to international investors thanks to the appealing yields in this market.”

KfW took the opportunity of an update to its Kangaroo documentation, conducted in February 2015, to add a combined Kangaroo and Kauri facility. The new programme has already paid dividends, as KfW issued NZ$1.1 billion in 2015 including its award-winning Kauri debut, having already priced its first-ever green Kangaroo bond as the inaugural new product based on the updated programme (see p67).

Kauri issuance slowed towards the back end of the year. This is a typical pattern for the New Zealand market, however – and Wehlert says the time it took KfW to make the leap into Kauri issuance should be taken as a sign that the issuer is not opportunistic.

“It has taken us too long to consider this market a short-term opportunity,” she says. “In a very short period of time we have established a liquid line which is the third-largest SSA Kauri bond and we intend to be a regular issuer in this market going forward.”

KfW BankengruppeNZ$650 MILLION 3.75% MAY 2020

JOINT LEAD MANAGERS: ANZ, BNZ, TD SECURITIES

KAURI ISSUER OF THE YEAR

There have been five winners of the Kauri Issuer of the Year award since its introduction during the inaugural KangaNews Awards in 2007, all of which are supranational, sovereign and agency names. The second-time winner of this category in 2015 has

been a regular and consistent supporter of the Kauri market, demonstrated by the fact that its NZ$5.7 billion (US$3.8 billion) is the most outstanding from a Kauri issuer while its NZ$7.2 billion all-time issuance is also a record.

World Bank’s Kauri efforts have been focused on consistency in issuance and a long-term commitment to the New Zealand market through the cycle, explains Andrea Dore, Washington-based lead financial officer at World Bank. “We focus heavily on investor outreach, seeing our investors a minimum of once a year. The Kauri market is strategic and World Bank’s approach is mentioned by other issuers as something which they try to emulate.”

In 2015, World Bank was the largest issuer by volume sold in the New Zealand domestic market behind the government, with nearly NZ$2 billion of bonds issued, and the supranational tries to manage its flow carefully. “We try to issue into demand but not to flood the market,” Dore explains.

She also reveals that Kauri issuance was of greater relevance to World Bank during 2015 than Kangaroos. “The biggest size we were able to achieve in Australia during 2015 was A$700 million [US$506.1 million] so, for the first time, we have executed a larger Kauri trade than a Kangaroo,” Dore explains. “This is also the first year in which we have executed larger volume overall in the New Zealand market.”

Dore tells KangaNews that World Bank’s approach to the Kauri market will be unchanged in 2016. However, when it comes to the likely conduciveness of issuance she also notes some headwinds – including the fact that there are no New Zealand dollar SSA redemptions scheduled for the first five months of the new year.

“While general demand and the cross-currency basis swap tend to be the main drivers for international-market issuance, a lack of redemptions means expectations around the level of reinvestment may be tempered,” Dore comments. “Even so, World Bank would like to continue to be a regular issuer into the New Zealand market and to be able to achieve the accolade of Kauri Issuer of the Year again in 2016.”

World Bank

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