Interview: Australian developer doubles bank panel to diversify risk

Australand Property has increased the number of banks it deals with in order to diversify risk due to ongoing global headwinds and as European banks pullout from the region, says its treasurer.

  • 13 Apr 2012
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Australand Property, a Sydney-based property company, has enhanced its panel of banks by doubling the number from six to 12 in order to minimise exposure to troubled western banks, particularly European ones, and to leverage on banks with stronger balance sheets, primarily Asian names.

“We have spread that exposure around to a greater number of banks,” said John Arentz, treasurer of Australand to Asiamoney PLUS in a telephone interview on April 11. “If one does have an issue and you are exposed to that bank then it’s going to cause you problems.”

“There is the replacement of European banks with Asian banks, predominantly Japanese banks that seem to be quite keen on Australian credit,” he added.

The company is benefiting from its ownership by CapitaLand, the Singapore-based property group, as it makes relationship building with Asian banks much easier. The Singaporean developer currently owns 59% of Australand’s issued capital.

Last year, Australand raised a US$716.5 million Australian dollar-denominated (AUD) syndicated loan, which was issued in two tranches – US$322.4 million and US$394.1 million that will expire in three and five years respectively. This loan also contributed to the increase in the number of banks.

The company is also keen to increase the duration of its debt in order diversify maturity dates and match its liabilities against the tenor of its assets, the majority of which are long-dated.

“It’s all about trying to split out your refinancing risk. You don’t want too much maturing in one given period,” declared Arentz. “Holding long-term assets such as investment property or even development assets that would on average have a three-year development life cycle, the tenor of the debt should then match the tenor of the assets.”

Previously, Australand had shorter debt tenors, averaging around two years, but now has increase it to three years and has a company target of up to four years.

Australand has US$199 million mortgage-backed security maturing next September and part of the AUD syndicated bond issued last year that will expire in June 2014. The company is always on the look out for opportunities to refinance those given that the pricing is right.

Australian developers face higher borrowing costs than their Asian counterparts. Australand’s weighted average cost of debt was 8.1% as of December 31, company statement shows.

In terms of forecasting cash flow, Australand believes it is challenging for a real estate developer to accurately forecast cash flows as it is usually driven by market supply and demand, and other domestic economic factors like interest rate expectations.

Home-loan growth could weaken further after Australia’s four biggest banks raised standard variable mortgage rates independently from the Reserve Bank of Australia (RBA) in February.

The number of new mortgages approved slumped by 4.2% in February, following a 0.2% drop in the previous month, according to a Westpac Melbourne Institute survey.

“It’s always difficult to forecast cash flows given it is the residential sector,” said Arentz. “Generally the housing markets have come off the ball a little bit purely because of the RBA (Reserve Bank of Australia) not cutting rates earlier this year…and then we saw interest rate hikes from the banks in mortgage rates. That’s taken a little bit of business out of the market.”

Home prices in Melbourne fell 5.4% in March from a year ago, compared with an average drop of 4.4% across Australia’s capital cities, according to RP Data, Australia's property information and analytics provider. The number of homes up for sale in Melbourne rose 23% in March from a year earlier, SQM Research numbers show.

As at December 31, 2011, Australand had a market capitalisation of approximately US$1.38 billion. Australand was listed on the Australian and Singapore Stock Exchanges in June 1997 and was formed into a stapled group in November 2003 with the stapling of units in Australand Property Trust to the ordinary shares in Australand Holdings.

  • 13 Apr 2012

Bookrunners of International Emerging Market DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 7,478.17 15 15.70%
2 HSBC 7,014.50 19 14.72%
3 Deutsche Bank 5,406.93 10 11.35%
4 JPMorgan 3,627.15 9 7.61%
5 Bank of America Merrill Lynch 2,414.03 9 5.07%

Bookrunners of LatAm Emerging Market DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
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1 Citi 3,783.77 4 20.92%
2 HSBC 3,266.83 3 18.06%
3 Deutsche Bank 2,977.43 1 16.46%
4 JPMorgan 1,766.98 6 9.77%
5 Bank of America Merrill Lynch 1,683.06 6 9.31%

Bookrunners of CEEMEA International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 15 Jan 2018
1 Citi 3,111.25 5 23.30%
2 HSBC 2,253.75 3 16.88%
3 Deutsche Bank 1,520.23 3 11.39%
4 Sumitomo Mitsui Financial Group 1,341.03 2 10.04%
5 Standard Chartered Bank 1,291.27 1 9.67%

EMEA M&A Revenue

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 02 May 2016
1 JPMorgan 195.08 50 10.55%
2 Goldman Sachs 162.26 37 8.77%
3 Morgan Stanley 141.22 46 7.64%
4 Bank of America Merrill Lynch 114.20 33 6.18%
5 Citi 95.36 35 5.16%

Bookrunners of Central and Eastern Europe: Loans

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 ING 3,668.64 29 9.07%
2 UniCredit 3,440.98 25 8.50%
3 Sumitomo Mitsui Financial Group 3,156.55 13 7.80%
4 Credit Suisse 2,801.35 8 6.92%
5 SG Corporate & Investment Banking 2,478.18 21 6.12%

Bookrunners of India DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 AXIS Bank 51.86 2 27.57%
2 Standard Chartered Bank 45.42 1 24.14%
2 Mitsubishi UFJ Financial Group 45.42 1 24.14%
2 CITIC Securities 45.42 1 24.14%
Subtotal 188.11 3 100.00%