(Australia) – Australia’s project financing markets have had a challenging year in 2002 with deal volume down by over 50 percent on 2001, but a new survey from industry analysts East and Partners forecasts that deal flow value is expected to climb back by around 20 percent next year.
East’s third
annual survey of Australasia’s Project and Structured Finance markets has
just been completed, following 158 interviews with senior executives from 48
firms sponsoring major projects in both Australia and New Zealand.
The survey
canvasses their views on the performance of banks and legal firms working on
48 projects varying in size from as low as A$50 million to over A$5 billion.
It covers some A$9.8 billion worth of transactions, constituting 95 percent
of the total market in the 2001/2 financial year.
East’s
research finds that average deal value fell sharply from A$405.3 million in
2000 to A$215.7 million in 2001 (a 46.8 percent drop) and by another 5.3
percent to A$204.2 million in the year to October 2002.
In the year
to October, 36.6 percent of projects were of A$1 billion or over, 30.3
percent were valued at between A$501 million-1 billion, 22.2 percent between
A$101-500 million, and 11 percent at A$100 million or below.
East predicts
that although pricing tightness is expected to continue in 2003, deal flow
and value is expected to climb by around 20 percent to A$12 billion. Average
transaction values, however, are expected to remain static.
The report’s
findings include:
-
The
top 3 lead project arrangers, by value, are Citibank/Salomon Smith
Barney (19.9 percent), Barclays Capital (18.5 percent) and the National
Australia Bank (16.5 percent). -
The
top three mandated project advisors (a positioning many players are
looking to develop) are Macquarie (14.6 percent), Citibank/Salomon Smith
Barney (10.4 percent), and ABN Amro (8.3 percent). -
Among
legal firms, Blake Dawson Waldron has the largest share of lead legal
advisory positions with 14.6 percent, followed by Mallesons (12.5
percent) and Henry Davis York/Minters (10.5 percent). -
Macquarie
Bank is the standout performer in the three categories rated as most
important by project sponsors out of 29 factors surveyed. These
categories are Execution Responsiveness, Quality of General Advisory
People, and Knowledge of Market risks. Citibank/Salmon Smith Barney is
rated second in each of these categories. -
Project
sponsors are increasingly seeing benefits in having their debt rated,
with 45.6 percent seeing this as critical or important in any project
finance. The agency of choice is increasingly Standard and Poors, which
is preferred by 65.2 percent of sponsors.
Commenting on
the report, East and Partner’s principal analyst Paul Dowling noted a
"clear mismatch" between what project sponsors rate as important,
and what lead managers are delivering.
Dowling noted
that knowledge of the asset type was rated as the 4th most important service
attribute out of 29 attributes, but was rated 4th worst in terms of
performance.
The top rated
performance attribute was responsiveness in transaction execution, but this
was also rated as the 4th worst in terms of lead arranger performance.
"Sponsors
also rated the Relevance of Other Banking Relationships as the least
important factor, which is interesting given the growing focus by the banks
on cross selling products," said Dowling.
"That
result must cast doubt on the big investments banks are making in building
institution-wide relationships with their clients.
"It
seems that project sponsors are sophisticated enough to pick and chose which
banks they want for different areas, and are resisting attempts by their
bankers to become ‘one-stop shops’ in this area."