Bank term debt shows new life
(25 May 2009 – Australia) Bank debt funding without the federal government guarantee safety-net is showing signs of recovery, with NAB becoming the first Australian bank, since overseas markets closed up, to raise term debt offshore without the guarantee.
Earlier in the month, ANZ announced that it had successfully priced A$1 billion of non-guaranteed domestic debt, while CBA and NAB have also successfully issued term debt locally.
NAB’s UK issue of £500 million (A$1.02 billion) in five-year unsecured notes, however, shows that access to global funding markets are starting to open up for Australia’s highly rated domestic banks.
The five-year unsecured notes were priced at a high level of 230 basis points above Libor (the London inter-bank offered rate).
In comparison, the A$1 billion, three-year issue by ANZ was at 128 basis points above the bank bill swap rate, while the CBA and NAB domestic issues were both at 130 basis points above BBSW.
The government guarantee currently costs the Australia domestic big four 70 basis points, to get the AAA sovereign credit rating.
Even with this added fee, a senior bank treasury source told the Australian newspaper that non-guaranteed debt was more expensive than guaranteed debt. An additional 20 to 30 basis points can be added for US debt compared to Australian debt; while a further 100 basis points are required for a non-guaranteed issuance.
A spokesman from NAB said that pricing for the UK term debt issue was helped by relatively healthy investor demand, with 159 British and European institutions subscribing to the deal.
The spokesman also noted that NAB was the issuer, and not its British bank, Clydesdale, which recently lost its AA rating.
NAB’s UK issue of £500 million (A$1.02 billion) in five-year unsecured notes, however, shows that access to global funding markets are starting to open up for Australia’s highly rated domestic banks.
The five-year unsecured notes were priced at a high level of 230 basis points above Libor (the London inter-bank offered rate).
In comparison, the A$1 billion, three-year issue by ANZ was at 128 basis points above the bank bill swap rate, while the CBA and NAB domestic issues were both at 130 basis points above BBSW.
The government guarantee currently costs the Australia domestic big four 70 basis points, to get the AAA sovereign credit rating.
Even with this added fee, a senior bank treasury source told the Australian newspaper that non-guaranteed debt was more expensive than guaranteed debt. An additional 20 to 30 basis points can be added for US debt compared to Australian debt; while a further 100 basis points are required for a non-guaranteed issuance.
A spokesman from NAB said that pricing for the UK term debt issue was helped by relatively healthy investor demand, with 159 British and European institutions subscribing to the deal.
The spokesman also noted that NAB was the issuer, and not its British bank, Clydesdale, which recently lost its AA rating.
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