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Debt Market Update Q4 2018

Debt Market Update Q4 2018

The fourth quarter of 2018 witnessed heightened global market volatility in the midst of geopolitical developments, including the US-China trade war and the Brexit process, as market participants grow cautious on the future outlook of debt markets. In response to rising borrowing costs for companies across the US and Europe, investors have closely monitored the communications of the RBA for guidance on any future adjustment of the target cash rate.


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Key themes

  • Market conditions – global market volatility heightens as investors grow cautious.
  • Australian bank debt market – refinancings comprise majority of volume as Q4 marks largest quarterly loan volume since Q1 2015.
  • Australian domestic bond market – busiest quarter of 2018 with continued investor support at extended tenors.
  • Funding corporate activity – depressed M&A lending continued in Q4 2018 and no sponsor backed deals reported as closed, capping off a disappointing year.
  • USPP – reduced volumes from Australia and NZ but strong international activity drives total USPP issuance.

Notable transactions

Notable syndicated transactions for the quarter included: 

  • QBE Insurance Group secured a US$2.4 billion three-year multi-tranche revolving credit facility for general corporate purposes in December 2018.
  • Seek Ltd closed a US$1.025 billion-equivalent multi-tranche refinancing, which comes only 18 months after completing its previous borrowing of A$917 million (June 2017), indicating a willingness for the online recruitment firm to tap back into the favourable market conditions for borrowers.
  • Treasury Wine Estates, the Australian listed entity, increased its US$300 million refinancing to US$350 million due to increased market appetite. The dual-tranche facility comprises a US$120 million 5 year term and a US$230 million 7 year term, with opening interest margins of 130bp and 165bp over LIBOR, respectively.
  • Qantas Airways, increased it’s A$300 million 10-year asset-backed loan to A$450 million due to an oversubscription (7x). Similar to the previously reported A$300 million facility in our Q3 report, the pricing of the increased facility is between 145-175bps tied to a loan-to-value ratio of 65-80 percent. The borrowing marks the second loan for Qantas under the financing program it set up in October 2017.
  • SGSP (Australia) Assets, owner operator of energy infrastructure assets (rated A- by S&P), closed an $A650 million 5.5-year revolving credit facility in November 2018. The funds will replace the A$600 million four-year tranche of the A$1.2 billion facility signed in December 2015, which also carries a A$600 million five-year portion.

Debt Market Quarterly Update

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