* Coca-Cola and Apple shift Aussie dollar debt up a gear
By John Weavers
SYDNEY, June 6 (IFR) - Two blue-chip offerings last week showed that the Australian bond market is becoming increasingly relevant as an alternative source of funding for the world's best-known companies.
Taking advantage of a dearth of issuance from both domestic and offshore corporations, Coca-Cola raised A$1 billion ($724 million) last Wednesday from its inaugural trade Down Under, two days before Apple returned to Australia for A$1.425 billion -- less than a year after its record-breaking August 2015 Kangaroo debut.
The two trades confirm that the Australian dollar market can deliver A$1 billion-plus financings for global corporations, putting the currency firmly on the radar of the world's biggest borrowers.
The format of the financings has shifted away from the traditional five-year benchmarks, which helped Coke and Apple appeal to the broadest possible investor base.
Earlier five-year Kangaroo trades from the likes of BP and Total raised between A$300 million and A$500 million, equivalent to just $362 million at current exchange rates. Given the time and cost involved in accessing a new market, the relatively small sizes on offer made it hardly worthwhile for large global issuers to tap the Australia dollar market in that way.
Apple changed the market dynamics last August with an innovative offering at tenors of four and seven years to raise a massive A$2.25 billion and set the template for subsequent corporate Kangaroo trades.
The four-year tenor attracted many local investors that traditionally target either the three-year or five-year segments, while the seven-year piece drew numerous foreign accounts seeking a longer duration from a global name.
Intel followed Apple with a relatively disappointing A$800 million four-year and seven-year Kangaroo sale last November, but the smaller-than-hoped for outcome was largely due to the weak market backdrop at that time. Fair pricing Coca-Cola raised the new unofficial A$1 billion benchmark target from Wednesday's bond offering of four and eight years via ANZ, Deutsche Bank and RBC Capital Markets without having to provide significant pick-ups over its US dollar curve.
The A$450 million 2.6 percent four-year piece priced 67bp wide of asset swaps, at the tight end of 70bp area guidance, while the 3.25 percent A$550 million eight-year piece printed in line with price talk of asset swaps plus 105bp area.
A syndication manager away from the deal estimated the four-year paid a 10bp concession to the issuer's US curve, while the eight-year was approximately flat to it.
Although no official breakdown was released, most interest is understood to have been for the smaller, shorter-dated tranche, which had scope for some tightening on the four-year portion.
Only Apple has issued a larger corporate bond in Australia, while Coke's A$1 billion trade matched mining giant BHP Billiton's local corporate record.
Apple followed on Coca-Cola's heels with an initial four-year and 7.6-year (January 10 2024) note offering around respective guidance of 85bp area and 125bp area over asset swaps. A third tranche, a curve-extending 10-year piece, was added the following day, for which price talk was set in the 135bp area.
While Apple (Aa1/AA+) has higher ratings than Coca-Cola (Aa3/AA-/A+), it has issued a lot more debt in a barrage of bond offerings over the last 18 months to restructure its balance sheet.
Apple's second Kangaroo sale raised a combined A$1.425 billion from 2.65 percent A$650 million four-year, 3.35 percent A$450 million 7.6-year and A$325 million 10-year tranches. The four-year printed 82bp wide of asset swaps while the longer-dated bonds came in line with initial guidance.
A local fund manager said Apple's pricing provided a modest pick-up over its US dollar curve. As Apple's US dollar May 2023s swap back to 115bp BBSW, 125bp for the new January 2024s looked like fair value, he said.
As far as Apple's existing Kangaroos are concerned, the August 2019s were quoted at asset swaps plus 70bp, providing the new four-year with a decent 12bp pick-up. The August 2022s were quoted at 100bp to give an extra 25bp for an 18-month extension, providing ample motivation for some existing Apple bondholders to switch to the new paper.
ANZ, which recently became the first Australian bank to support Apple Pay, replaced CBA as joint lead manager on the new issue. Deutsche Bank and Goldman Sachs retained their lead roles from Apple's 2015 debut. (Reporting By John Weavers; editing by Daniel Stanton and Steve Garton)