Commonwealth Bank of Australia announces new AUD750 million February 2003 issue
27 July 2000
Commonwealth Bank of Australia announced today its intention to issue AUD750 million of securities under its Commonwealth Bank Medium Term Securities Programme ("Commets"). The issue is expected to be priced later today, subject to market conditions being satisfactory.
The proposed issue will be for AUD750 million with a maturity date of 10 February 2003 and will be used for general funding purposes.
Pricing is expected to be set in the range of 61 to 64 basis points over the CGS October 2002.
Commonwealth Bank will be lead manager of the issue with the co-managers being:
- RBC DS Global Markets
Salomon Smith Barney Australia
UBS Warburg Australia
John te Wechel, Head of Group Funding, Commonwealth Bank, said "This is a very important issue both for the Commonwealth Bank and the Australian market. In many ways, both the Bank and the market will be breaking new ground with this issue."
The deal will be the Bank's first senior syndicated issue launched in the Australian market without the benefit of a guarantee from the Commonwealth of Australia. Mr te Wechel said, "We're confident that the market will be receptive to the issue. Commonwealth Bank is a very well known credit. Investors know from the performance of our previous benchmark guaranteed transactions that we take a responsible approach to our issuing programme."
A feature of the deal is its large size, AUD750 million. While tranches of this size in the domestic market are still rare, there has been a growing trend in the offshore markets for major borrowers to issue in large volume. Deals in excess of USD500 million are not unusual. The move to larger tranche sizes is driven by investor demand for liquidity. "From our discussions with both local and offshore investors, it's clear that they prize liquidity. By providing a large, fairly priced and broadly placed transaction, our aim is to give the market what it wants - a well performing, liquid deal," Mr te Wechel added.
To enhance liquidity, the Bank is encouraging participation by offshore investors. The managers for the transaction will be marketing the securities in Europe and Asia. "The Australian Government recently passed legislation to liberalise the Australian withholding tax regime. Its aim was to promote Australia as a centre for global financial services and to develop the Australian corporate debt market," Mr te Wechel said. "By encouraging offshore placement for this transaction, we are showing our support for the Government's initiative."
To broaden placement and add to liquidity, the deal will also be the first integrated wholesale and retail transaction launched in the Australian market. The listing of the securities on the ASX and a minimum parcel size of AUD5,000 should help to promote interest from retail investors. Those investors will be able to subscribe for bonds electronically via Commonwealth Securities. The securities will not be in the form of deposits unlike previous senior transactions by the Bank in the Australian market as deposits are not able to be listed.
According to Mr te Wechel, "The Commonwealth Bank is trying to encourage the development of the retail market for fixed income securities in Australia. We're excited by the long term potential for retail demand but not expecting to be swamped on this first transaction - it will take time for retail investors to become familiar with these transactions."
In keeping with the Bank's market position at the forefront of e-commerce in Australia, the managers on the transaction will be doing an electronic bookbuild. Institutional investors will also be able to place their orders electronically via the management group if they desire.