Woolworths, Kathmandu and TCorp top FinanceAsia’s deal awards

DEAL AWARDS

BEST IPO
HomeCo, A$325 million
Credit Suisse, Goldman Sachs, JP Morgan
Legal advisers: Baker McKenzie, Gilbert + Tobin
HomeCo’s shares surged 12% when they debuted in October putting a silver lining around an otherwise gloomy consumer market in Australia. The retail property group upsized the deal from an original target of A$300 million thanks to early support from cornerstone investors which included several of Credit Suisse’s private banking clients – a who’s who of Australia’s rich. The shares were also popular with retail investors chasing a fully franked dividend of 6%. In the end, retail investors represented 55% of allocations. HomeCo’s tenants are mainly convenience bulky-goods retailers while about 20% offer services such as gyms, pharmacies and medical centres. This combination ensures long-term income stability with structured annual rental escalations.

BEST SECONDARY OFFERING
AMP placement, A$650 million
Credit Suisse, UBS
Legal advisers: Ashurst, King & Wood Mallesons, Sullivan & Cromwell
After being lacerated for dodgy practices during last year's government enquiry into financial services misconduct, AMP has embarked on a three-year transformation strategy towards a client-led, simpler, growth-oriented business. The diversified financial services company needed capital to execute the strategy and so in August raised A$650 million via a fully underwritten placement – its first equity raise for more than 10 years. The placement was launched without a market sounding process and priced at A$1.60 or a 7.5% discount to its previous close. Investors bought the shares while absorbing significant negative news from the company including half-yearly results, the sale of AMP Life and a complete overhaul of management. Our judges liked this deal for its courage.

BEST M&A DEAL
Brookfield Business Partners acquires Healthscope, A$5.7 billion EV
Adviser to Brookfield: BofA Securities
Adviser to Healthscope: UBS
Legal advisers: King & Wood Mallesons, Herbert Smith Freehills
Healthscope’s sale to Brookfield Business Partners in June 2019 rewrote the takeover playbook in Australia. The lengthy sale of the private healthcare provider involved a complex dual-structured transaction comprising a concurrent scheme and takeover followed by a property sale and leaseback to fund the deal. As financial advisors to Brookfield, BofA Securities executed the simultaneous structure to overcome a 19.1% blocking stake held by the BGH consortium which should have locked out rival bidders. Other facets of the deal were also impressive including a limited “no fiduciary out” period during due diligence and a 3% reverse break fee.

BEST LOCAL BOND
Pacific National MTN, A$450 million
ANZ, Commonwealth Bank of Australia, MUFG, National Australia Bank
Legal adviser: Allens
Pacific National is a rare long-tenor borrower in the BBB- corporate space in Australia and in September returned to the domestic market with a A$450 million deal. The transaction exceeded its 2017 benchmark 10-year issue by A$100 million which shows there is increasing depth for issuers further down the credit spectrum. Pacific National ran a roadshow through Australia, Asia and the UK with the final order book topping A$1.35 billion across 80 accounts. The FRN component of the deal was collapsed and the bonds priced at the tight end of guidance at +250 basis points – significantly inside Pacific National’s outstanding US dollar 2028 bonds.

BEST INTERNATIONAL BOND
Toyota Finance Australia senior unsecured notes, €1.15 billion
Barclays, BNP Paribas, Citi, HSBC, Societe Generale
Legal advisers: Freshfields Bruckhaus Deringer, King & Wood Mallesons
In April, Toyota Finance Australia returned to the euro market with a nifty €1.15 billion dual-tranche two-year, five-year transaction. A roadshow through Asia and Europe generated orders from 161 investors for the five-year bonds and 122 investors for the two-year bonds. Final books registered at €1.8 billion for each tranche implying a subscription ratio of 2.8 times and 3.6 times respectively. The strength of the order book allowed for the final spread to be set at the tight end of guidance for the two-year notes, and two basis points inside the guidance range for the five-year notes. Roadshow participants were allocated 45% of the total deal.

BEST HYBRID (JOINT WINNERS)
BNP Paribas perpetual NC5.5 Tier 1 notes, A$300 million
ANZ, BNP Paribas, Commonwealth Bank of Australia, National Australia Bank, Nomura, TD Securities, Westpac
Legal adviser: Allen & Overy
Overwhelming investor appetite for BNP Paribas’ inaugural offshore Australian dollar Tier 1 notes opened a new liquidity pool for this seasoned borrower which has tapped the local Tier 2 markets several times in recent years. The bank picked an opportune window in the global news cycle in July to optimise its capital structure and match its risk-weighted assets in Australian dollars. The deal attracted broad real money accounts from Australia and Asia which were desperate for yield. Price guidance was revised twice on the intra-day deal with the final yield set at 4.5% for a A$300 million print from a final order book of A$2.4 billion.

Macquarie Tier 1 capital notes, A$905.5 million
ANZ, Citi, Commonwealth Bank of Australia, Evans Dixon, J P Morgan, Macquarie Capital, Morgans Financial, National Australia Bank, Westpac
Legal adviser: King & Wood Mallesons
The strength of Macquarie’s name with hybrid investors was on show this year when it issued A$905.5 million in Tier 1 capital notes to a receptive market. Macquarie’s initial target of A$500million was well surpassed and the book was two times oversubscribed in just two days. The deal was executed in the shadow of a Federal government election with the looming possibility that franking credit laws might be changed. The small premium paid by Macquarie relative to Australia’s major banks set a new benchmark and proved that investors recognise the benefits of diversification that Macquarie provides.

BEST DEBT FINANCE DEAL
Columbus Capital’s Vermillion 2019-1 RMBS, A$250 million
Credit Suisse, MUFG, Natixis, Standard Chartered, Westpac
Legal advisers: King & Wood Mallesons, Allen & Overy
Non-bank lender Columbus Capital unearthed a new market for securitised assets in September, issuing a seven-tranche deal backed by Australian residential loans held by overseas individuals. Foreign buyers have had a strong appetite for apartments in Australia’s capital cities but changes to lending laws have caused a liquidity squeeze in the sector. Arranger Credit Suisse says that it is the first RMBS transactions backed by 100% non-resident loans and the first pool of such loans to be rated by Standard & Poor’s. Investors priced the bonds slightly wider than comparables but Columbus Capital achieved its target of breaking new ground and the deal has paved the way for other non-bank lenders to follow suit.

BEST SUSTAINABLE FINANCE DEAL – CORPORATE
Woolworths green bond, A$400 million
ANZ, Citi, JPMorgan
Legal advisers: Clifford Chance, King & Wood Mallesons
Woolworths spent six months developing a new low-carbon buildings criteria for its supermarkets before launching this inaugural green bond. The criteria specified that supermarkets operating within the top 15% of its peers in carbon emissions efficiency, and working towards a target of zero carbon emissions by 2050, would be an eligible asset under the Climate Bonds Initiative criteria. The company said that it wanted to show that even high energy users in the retail sector can take action on lighting, refrigeration and air-conditioning to reduce their carbon footprint. Three-quarters of the bonds were bought by Asian and European investors, while the rest were bought by Australian accounts. Nearly all were pure green investors.

BEST SUSTAINABLE FINANCE DEAL – FINANCIAL INSTITUTION
New South Wales Treasury Corporation sustainability bond, A$1.8 billion
ANZ, BofA Securities, National Australia Bank
Legal adviser: Ernst & Young, King & Wood Mallesons
Heralding a break away from pure green bond issuance, NSW Treasury Corporation launched a sustainability bond in October and managed to print a large deal at a margin of 43.5 basis points over sovereign three-year futures contracts. The book was 1.4 times oversubscribed with 56 investors placing orders. The expansion of the asset pool into social projects required significant collaboration between the financing body and government agencies to identify meaningful projects, and then communicate the benefits of these projects to investors. At issuance, the assets included accessible transport programs, water infrastructure projects and the building or upgrading of schools.

BEST PROJECT FINANCE DEAL
Kiamal Solar Farm, A$250 million
ANZ, ING, Natixis
Legal advisers: Herbert Smith Freehills, King & Wood Mallesons
The Kiamal Solar Farm being constructed in the state of Victoria by Paris-based power producer Total Eren is a complex project involving multiple offtakers and contractors each with different credit profiles. When complete, it will displace more than 610,000 tonnes of carbon dioxide emissions annually. The non-recourse financing for Kiamal has been structured to leverage revenue from a large synchronous condenser being installed to strengthen the electricity grid in the region. ANZ says that this is the first time a critical asset has been applied in a project financing, and it also shows that funding is available for projects despite mixed messages from Australia’s energy regulators relating to market operator connection requirements.

MOST INNOVATIVE DEAL
AGL Energy syndicated sustainability-linked loan, A$600 million
ANZ, BNP Paribas
Legal advisers: Ashurst, Herbert Smith Freehills
As one of Australia’s top carbon emitters, electricity generator AGL made a significant step forward in reducing its environmental footprint by issuing Australia’s first syndicated sustainability loan outside the airport sector and based on bespoke targets rather than broad-based ESG measures. The applicable margin over the tenor on the A$600 million loan is based on AGL increasing the proportion of renewable energy it generates over total generation, and on total carbon dioxide emissions as a percentage of total sent-out generation. These targets step up in line with AGL’s best performance through the term of the loan. The terms were agreed after lengthy negotiations between AGL and its 13 lenders.

BEST NEW ZEALAND DEAL
Kathmandu acquires Rip Curl plus acquisition financing, A$350 million
Advisers to Kathmandu: Credit Suisse, Jarden
Adviser to Rip Curl: Gresham
Financing arrangers: Credit Suisse, Deutsche Craigs, Jarden
Legal advisers: Chapman Tripp, Gadens, Gilbert + Tobin, Herbert Smith Freehills, Russell McVeagh
Kathmandu’s acquisition of Australian surf brand Rip Curl in October was a transformative move which created a NZ$1 billion global outdoor and action sports company. The deal has significantly diversified Kathmandu’s revenue profile by providing access to new markets globally and is expected to add around 10% to the company’s earnings within the first year. Advisers to the transaction conducted an extensive due diligence process across six geographic regions and on a compressed timetable. Kathmandu paid a multiple of 7.3 times 2019 earnings. The funding structure included a pro-rata entitlement offer, a vendor placement and new senior debt facilities to the tune of A$375 million.