WESTFIELD Group has become the second listed property trust to swiftly cash in on the stabilising US equity markets, securing $US700 million ($891 million) through a bond issue.
In a move that suggests property groups are starting to claw back some power from the banks, the world's largest shopping centre owner increased the initial issue of $US500 million by $US200 million on the back of strong demand.
Within an hour of the issue being launched, investors were willing to pour $US2 billion into the property trust's coffers, according to sources.
"It is a combination of the capital and the credit markets stabilising in the US," said one source in connection to why Westfield launched the offer and why demand was so strong. "There is a lot of cash sitting on the side looking for investment."
Westfield is the second property group to issue bonds in the US after its competitor the Simon Property Group completed two issuances in the past eight weeks.
Westfield's latest issue follows a bond issue by Colonial First State Retail Trust (CFX) in Australia this month. Credit Suisse analyst Andrew Rosivach said these two issues were encouraging, indicating that alternative debt markets were opening up.
"The grip banks have on listed trusts is loosening," he said.
In the first bond issue in Australia by a property entity, CFX attracted demand of $250 million, but the trust took up $125 million because of the cost. The money cost CFX between 8.5-8.75 per cent.
In April last year, Westfield raised $US1.1 billion from the US bond market and in February this year completed a capital raising for $2.9 billion in Australia.
Simon Wheatley, Goldman Sachs JBWere's head of A-REITs research said the US bond market continued to be active and the pricing was in the expected premium range paid in recent US issues. The effective cost of the bond issue to Westfield was 7.75 per cent.
In a statement, Westfield said proceeds from the five-year note issue would be used to repay borrowings under the group's revolving credit facilities. Company secretary Simon Tuxen said the money would be used for normal business.
Westfield has $1.4 billion of debt maturities this year. Mr Wheatley said Westfield would likely use the proceeds to repay a $400 million CMBS (commercial mortgage -- backed securities) due to mature this year.
Mr Wheatley expected the balance of $1 billion of mortgage debt expiring this year to be rolled over.
The next significant debt expiry will be for $3.9 billion in the second half of next year.
Westfield's joint managing director, Steven Lowy, said in a market update this month that after its February capital raising, the group had more than $7billion of liquidity and gearing of 34.6 per cent.
In that update, Westfield reported a 1.5 per cent increase in the March quarter sales to $20.9 billion, but sales in its US shopping centres dropped 3.2 per cent for the quarter or 8.4 per cent for the year to the end of March.
JPMorgan's head of A-REITs research, Rob Stanton, said reports of a significant improvement in US consumer confidence earlier yesterday were positive news for the group.
US research firm Conference Board's sentiment index jumped to 54.9 (higher than forecast), the biggest jump in six years. Westfield securities closed at $10.61 -- up 29c.
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