Dale Bridle, group treasurer, John Fairfax Holdings
Linda Laznik, group treasurer, The GPT Group
Phil Wallis, manager funding & investments, Telstra Corp
Andrew McGregor, head of debt advisory, AMP Capital Investors
George Confos, general manager, institutional lending solutions, CBA
Loretta Venten, general manager, loan markets, CBA
The liquidity crisis has failed to halt the flow of money into the Australian syndicated loan market - one of the few markets open to issuers over the period of dislocation. The relative stability of that market drew three major borrowers - Wesfarmers, GPT Group and Macquarie Bank - to fund a total of A$21 billion ($19.3 billion) in the syndicated market during the crisis, a stunning testimony to the stable pricing and terms of that market.
On October 31, Commonwealth Bank of Australia and FinanceAsia jointly hosted a roundtable discussion featuring four key Australian borrowers to discuss their key funding drivers during the crisis and developments in the syndicated loan market.
George Confos:Although pricing in the syndicated loan market has moved out, it has not widened to the huge extent it has in the bond market, primarily because pricing had not tightened in the loan market to the degree
that it had in the bond market. Consequently the loan market has experienced relative stability in terms of pricing and volumes over the period of dislocation.
What drove you to access the loan market?
Dale Bridle: Fairfax accessed three markets to fund the acquisition of Rural Press. The deal provided our first opportunity to get a broad cross-section of debt investors into our portfolio as we had traditionally been a bank borrower and a US traditional private placement (USTPP) borrower. We raised A$2.1 billion û via A$1.2 billion in the Australian loan market, split between threefour-, and five-years; a US$250 million USTPP; and a euro350 million eurobond. The opportunity in the local market was to broaden our bank group. We traditionally had a core bank group, but with the company trebling in size over three years, we wanted more opportunities to grow relationships.
Phil Wallis: Telstra executed a A$1 billion fiveyear syndicated bank loan in October and we received surprisingly strong support, considering the severity of the liquidity crunch û we were twice oversubscribed with a good spread of domestic and offshore banks, including a couple of new names. We had around A$2.6 billion in long-term debt to raise this financial year. The credit
crunch hit in August and September and left us with few viable funding alternatives. The loan market exhibited key advantages over the period of liquidity crisis when the bond markets shut down and couldnÆt price anything. The syndicated loan market offered a relatively stable pool of capital that provided certainty of execution, timing, price, covenants and access. It also provided reputational protection. A loan transaction is a private deal û you arenÆt exposed in the same way you are in the public bond market if things go wrong.
If the bond market continues in a state of flux, will you consider returning to the syndicated loan market?
Wallis:We would look at it û but we would examine the comparative pricing and volume closely in relation to the bond market alternative. I am not expecting the bond market to remain closed next year. If that was to happen we could go back to the loan market, but the loan market practically dries up after five years, and we require quite a bit of longer-term funding. So itÆs unlikely our funding objectives could be entirely satisfied by the loan market.
Linda, GPT recently successfully executed a euro 2.01 billion syndicated facility raising one-, three- and fiveyear tenors. You had a bridge maturing and a relatively short debt maturity profile û why did you decide on the loan market?
Linda Laznik: It was a tough decision at the time, given when we started considering a deal the issues with liquidity were beginning to be felt. We were a bit nervous about the volume, but feedback from the market was very positive. We spent the first half of the year looking to fund through the euro mediumterm note (EMTN) market. We began that programme in April and then went to Europe to meet with investors. We were hoping to get that away, but events overtook us.
We would have always done another syndicated deal, but maybe not in the volume we eventually did, because we couldnÆt get that EMTN issue away.
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