Aussie firms tap bond market
THE US private placement corporate bond market is attracting an increased number of Australian companies, offering long-term money with attractive yields. The number of private placements by Australian issuers in the US jumped from 12 to 23 last year, with the total funds raised increasing from $US2.4 billion ($3.12 billion) to $US4.1 billion ($5.33 billion).Private placements do not require a credit rating and the market is open to borrowers that are below investment grade. The market provides fixed-rate funding for terms of from seven to 15 years, which is rarely available in the Australian market.
Australian companies such as Spotless and Murray Goulburn have been able to tap the market as well as larger companies like Coca-Cola Amatil and Stockland.
Westpac has been the biggest arranger for Australian borrowers, in partnership with Banc of America Securities, accounting for $US1.1 billion of the issues last year. Westpac's head of public markets, Peter Bloomfield, said the market was driven by American insurance companies, which must place a proportion of their funds in long-term assets.
With US cash rates at one per cent, there is a vast pool of money looking for a home, which has pushed yields on sub-investment grade paper sharply lower.