re: Ann: Secures two investment-grade credit ... Australian...

re: Ann: Secures two investment-grade credit ... Australian Corporates Could Shift To Local Debt Market

By Enda Curran
Of DOW JONES NEWSWIRES

SYDNEY -(Dow Jones)- Australia's bond market, long dominated by bank debt, could be in for a change of scenery as corporate demand to diversify funding meets eager investors willing to lend further out the credit risk spectrum.

The result could be growth in domestic corporate issuance that could deepen Australia's debt market, giving companies more funding options and investors a greater variety of places to park their money.

The revival will be driven by a confluence of forces. Companies want to issue longer dated bonds as an alternative to bank loans, equity funding and offshore borrowing to diversify their finances. The costs of converting offshore funds into Australian dollars - known as the cross currency basis swap -has remained stubbornly high since November, taking some of the lustre off the offshore market.

Completing the equation, investors are keen to diversify their portfolios away from bank bonds and want corporates to sell debt with a long maturities and attractive yields.
"The idea is not to have all your eggs in the one basket or one sector. You want to be able to have the ability to diversify your book," said Bob Sahota, Senior Portfolio Manager at Challenger Financial which manages A$5.2 billion in fixed income assets.

Investment banks sense the mood change, and have been dropping various names to investors to gauge their interest.
Property companies could come first. Goodman Group wants to issue five- or seven-year bonds, and though it is looking to borrow offshore, it will consider local currency issuance, chief executive Greg Goodman said.

Blue chip corporates have also been meeting with investors. Global mining giant BHP Billiton is holding tentative discussions with fund managers, said people familiar with the matter, something it hasn't done in a decade, while foreign names are also seeking to cash in on the diversity line.

Public debt issuance in 2009 in Australia, excluding asset-backed securities, reached A$101 billion - but just A$3.6 billion of this was from non-bank companies.
Robert Meade, Head of Portfolio Management at PIMCO Australia, said investors are willing to purchase debt securities with five- or seven-year maturities from corporates with a solid track record.

"If pricing stacks up versus global levels, then there will be demand," Meade said. "Companies with strong cashflow streams will be most attractive to PIMCO."
A healthy reporting season that underscored balance sheet resilience supported by Australia's accelerating economic growth has caught investors attention.

Still, opening the local market likely won't be smooth. Investors offshore still offer voluminous pools of funds and a willingness to buy at short notice. The basis swap--which tends to be volatile-- could shift rapidly back in favor of international issuance.

Wesfarmers (WES.AU) recently held a routine update with Australian investors, but opted to sell euro denominated debt instead, a typical form of funding for many Australian companies.

Transport infrastructure company Asciano Group joined a growing list of entities seeking a public credit rating to allow them issue bonds but is more likely to borrow overseas.

"The better opportunities are offshore, but the Australian market is developing," Peter McGregor, chief financial officer at Asciano Group said.

-By Enda Curran, Dow Jones Newswires

http://www.easybourse.com/bourse/actualite/focus-australian-corporates-could-shift-to-local-debt-market-806291