Australia Corp Bonds:Telstra Plans Up To A$1.5B Issuance
June 8, 2001
Dow Jones Newswires
By REBECCA THURLOW
A Dow Jones Newswires Column
SYDNEY -- Australia's Telstra Corp. Ltd. (TLS) kicked off a roadshow Friday for its impending euro and Australian dollar issues with plans to inject up to A$1.5 billion of bonds into domestic capital markets in the coming financial year.
Industry sources said Telstra is looking at an initial 7-10 year issue comprising at least EUR1 billion in Eurobonds this month followed by a A$500 million to A$1.0 billion issue, probably in July.
But Telstra's presentation delivered to investors in Melbourne indicates issuance won't stop there, with the company planning to borrow A$3.5 billion to A$4.5 billion locally and offshore in long-term funding in the financial year ending June 30, 2002.
The proposed composition, while subject to changes in market conditions and cash flows, is A$0.5-A$1.5 billion in domestic funding, and A$1.5-A$3.5 billion in euro and U.S. dollar issues, as well as A$0.5 billion in euro and U.S. dollar placements.
The borrowings will be used to refinance maturities and reduce short term debt, Telstra said.
The company expects it will require about A$0.5 billion to cover its cash flow requirements, A$2.0-A$3.0 billion to reduce its commercial paper holdings and A$2.0 billion to cover bank loan maturities.
Telstra said it plans to focus on issuing 7-12 year bonds as it attempts to lengthen its maturity profile. It hopes to shift its average maturity to 4-6 years, from 3.2 years currently.
The roadshow moves on to Sydney Tuesday before heading to four centers in Europe later in the month.
As it prepared to approach investors this week, Telstra received an AA-minus long-term rating from international ratings agency Fitch on Wednesday, adding to its ratings of Aa3 by Moody's Investors Service and A+ by Standard & Poor's.
Telstra may need more ammunition than it has in the past to woo investors, many of whom were burnt by a dramatic blowout in the spread of Telstra's March 2010 bond issued at 35 basis point over swap in March last year.
The spread on the A$510 million issue is now at 105 basis points after souring amid concern over Telstra's joint venture with Hong Kong's Pacific Century CyberWorks Ltd. (PCW) and Telstra's losses surrounding its high profile investments in Australia's Solution Six Holdings Ltd. (A.SOH) and Sausage Software Ltd (A.SAS).
"They (the spreads) blew out from day one and if Telstra wants to win back the good will of Australian investors they're going to have to provide an attractive price," said BT Funds Management Head of Corporate Securities Rob da Silva.
Ausbil Dexia Associate Director of Fixed interest John Honan said he wasn't interested in buying Telstra bonds at the long end of the curve.
"Our market's not that mature. Ten years is just too long for a corporate, particularly in a volatile sector like the communications sector," Honan said.
Westfield NZ Planning Kangaroo Bond
Property trusts dominated local issuance again this week with Stockland Trust Group (A.SLT), rated A- by S&P, issuing A$150 million 2003 bonds at 45 basis points over the swap curve and AMP Diversified Property Trust (A.ADP), rate A by S&P, issuing A$100 million 2005 bonds at a wider spread of 54 basis points over swap because of its longer maturity.
And there's more on the horizon as Australia's Westfield Trust (A.WFT) amends its medium term note program to allow subsidiary Westfield New Zealand Ltd. to do an Australian dollar bond issue.
An industry source said the bonds will be guaranteed by Westfield Trust, with the size yet to be determined. No managers have yet been officially appointed but National Australia Bank and ABN AMRO have been appointed coordinating banks for the documentation process.
The news follows Westfield New Zealand's purchase of the 50% stake it didn't already own in Westfield Shoppingtown Manukau, south east of Auckland, from joint venture partner Axa New Zealand for $NZ83 million last month.
-By Rebecca Thurlow, Dow Jones Newswires;
61-2-8235-2959; rebecca.thurlow@dowjones.com
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