Maturity: December 28, 2006
Issue/re-offer price: 99.665
Spread at re-offer: 50bp over the 7.5% December 2006 Gilt
Launched: Monday August 5
Sole mgr: HSBC
Being a borrower with a dollar funding target, Westpac had not sold a great deal of its issuance in the UK and this transaction provided the company with an opportunity to diversify its investor base.
Westpac went on a non-deal related roadshow in the UK this year and since then have been looking to access the fixed rate sterling market. When we thought that the numbers stacked up, we were comfortable in launching the issue, confident that a double-A name in current market conditions would be attractive to investors.
Certainly we have seen good demand in the last couple of weeks for short dated debt as there has been a simultaneous move down the maturity curve and a move up the credit curve. This provided an ideal background for Westpac's transaction.
There is little non-UK senior financial issuance in the sterling market but, as a comparable, the most recent issue was a December 2004 HBOS issue, which was trading at 40bp over the Gilt. Westpac came at 50bp over, but it was more a question of offering a headline spread for a new name than offering a pick-up over existing debt. And, at Gilts plus 50bp, Westpac did not have to compromise its dollar funding target.
The issue went very well. There has been little new issuance in the last few weeks and what there has been has been taking longer to execute than in normal market conditions. This bond, however, was virtually subscribed in a matter of hours, so we were delighted that the issue succeeded in such volatile conditions where other names have struggled.
The issue is currently (Wednesday afternoon) trading at Gilts plus 50bp bid.