Asiamoney Australia Awards 2014: the brightest and the best
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Asiamoney Australia Awards 2014: the brightest and the best

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Asiamoney is pleased to announce the winners of the 2014 Australia Awards. After suggestions by bankers from global and domestic institutions, we weighed the most impressive deals and banks in the market last year. The decisions were not always easy, but we hope to have picked a series of winners that truly highlight the breadth of potential in Australia's capital market. It was a good year for the overall market; it was a great year for the winners below.

BONDS

Best Securitization

Resimac Premier Series 2014-1 A$750m dual-currency prime RMBS

Bookrunners: JP Morgan, NAB

There were certainly bigger deals last year than Resimac's A$750m prime RMBS deal that was sold at the end of May. Commonwealth Bank of Australia's Medallion Trust Series 2014-1, for instance, raised a whopping A$4bn in the middle of September. Westpac's Series 2014-1 WST Trust raised A$2.5bn in May. But there was surely no other deal in Australia's RMBS market that showed the possibilities available to borrowers quite as much as Resimac did when it attracted US investors to a term RMBS tranche.

US investors are no strangers to Australian RMBS deals, but they typically want to buy bullet tranches, which have well-defined maturities. This helps them limit their exposure to the underlying assets, and gives them a firm idea of when they will get their money back. But it also limits the appeal of these investors to originators that largely want to fund through amortising notes that are paid off as the underlying mortgages pay back.

Resimac's funding team managed to overcome the reluctance of US investors to take this term debt, and showed the true potential of the offshore investor base in the process. US investors proved willing to buy a US$200m amortising structure that gave them a weighted average life of 2.9 years. The triple-A rated, US dollar tranche — which paid investors a spread of 70bp over three month dollar Libor — was the first of its kind since the global financial crisis.

The deal got strong demand from Australian investors, allowing Resimac to increase the size to A$750m from an intended A$500m. But the key takeaway for bankers was the strong demand from the US market. They now think the deal has established a template which other originators will be able to use to get term investment from US accounts. That, in itself, surely deserves an award.

Best International Bond

Scentre Group's €2.1bn multi-tranche bond

Bookrunners: Barclays, BNP Paribas, Deutsche Bank, HSBC

The management of Scentre Group could not be accused of wasting time. The company was formed from a merger between the Westfield Retail Trust and the Australia and New Zealand assets of Westfield Group — and before the ink on the merger agreement was dry, funding officials from the newly-created company were on the road meeting bond investors. Perhaps even more impressive was the type of investors the company chose to appeal to.

Euro-denominated deals from Australian corporations are still something of a rarity in the global capital markets, and sterling denominated transactions even more so. But Scentre Group chose not to go for one or other of these markets, but to combine both at once, selling a deal with euro and sterling tranches after a roadshow that took the management to London, Paris, Frankfurt, Edinburgh and Amsterdam.

The management appeared to have their work cut out for them on the road, hoping to explain to investors a new company structure that had only become effective the day the roadshow began. But investors were already familiar with the operations of Westfield Group and, in the end, getting a decent grasp of the newly-formed company did not prove an insurmountable challenge.

The bookrunners managed to drum up €5bn of demand for the deal, an impressive order book for a transaction that ended up being worth €2.1bn. The final amount was split between a €400m four year tranche, a €600m six year issue, a €600m 10 year note and a £400m 12 year bond, with all of these tranches pricing at the tight end of guidance.

Best Local Currency Bond

Australian Commonwealth Government's A$7bn 2037

Bookrunners: Australia and New Zealand Bank, Citi, Westpac, UBS 

The Australian Office of Financial Management, the borrowing arm of the Commonwealth of Australia, could be forgiven for thinking that this award is theirs to lose in the years to come. The funding team won this award last year, after closing a A$5.9bn 2033 bond that was, at the time, the biggest local bond in the country's history.

They have scooped it again this year by closing a deal that easily eclipsed the size of that transaction.

The A$7bn bond was not the longest tenor ever issued in the local market, but it has pushed the maturity curve into uncharted territory, moving it past the 2033 bond priced in 2013. It was also one of the most successful deals in recent memory when it came to appealing to new investors. Bankers working on the deal said it had the largest participation of real money investors in an Australian government bond in the last three years. They also said the government managed to appeal to investors outside of its traditional investor base, including appealing to some south American accounts.

The deal can lay claim to being the biggest sovereign bond in Australian history, but it will have to share that honour. The Commonwealth of Australia sold a A$7bn bond earlier in the year, opting for a maturity of 2026 for that deal. That transaction no doubt helped pave the way for this longer issue, allowing the bookrunners to build more than A$10bn of demand after holding the books open overnight and price the transaction at a spread of 62bp over the exchange for physicals price.

The bond ended up being split 55%-45% between onshore and offshore accounts, after particularly large demand from investors in Asia and the United Kingdom. The strong order book has proved beneficial to investors in the aftermarket: the deal tightened by around 5bp at the end of last year, according to bankers.

Best Local Currency Bond House

Australia and New Zealand Bank

Australia and New Zealand Bank has long been a titan in the domestic bond market, and 2014 was no different. The bank managed to close more local bonds than any other bookrunner in the market, including working on some of the most eye-catching deals in the market all year.

The bank was pushed close this year by Westpac, which managed to raise slightly more for foreign and domestic borrowers, albeit while working on fewer deals. Westpac closed Australian dollar deals worth US$23.34bn for foreign and domestic borrowers alike, compared to the US$22.28bn that ANZ managed. But ANZ got to this number through 122 deals, compared to the 94 that its rival worked on.

ANZ should get credit for working on some of the most impressive bonds closed in the country throughout last year, including the Australian government's A$7bn 30 year deal and Bendigo and Adelaide Bank's A$292m tier one perpetual, both of which won Asiamoney awards this year. The bank also helped manage the A$600m bond debut of AGL Energy, the largest BBB corporate deal in the local market, and A$525m debut from Aurizon, which briefly held that same distinction.

Despite the bank's firm standing in the local market, it is perhaps ANZ's ability to provide offshore funding options for Australian companies that really makes it stand out from the crowd. ANZ has proved more hungry than any of its rivals to explore the overseas markets, making it a natural bookrunner for corporations that are hoping to do the same. But even when the focus is narrowly on the domestic market, it is clear that ANZ has built a team that can find common ground between borrowers and investors time and time again. 

 

Best International Bond House

Citi

Citi managed to stand out from many of its peers last year by offering its clients access to a diverse array of investors. The bank has, perhaps unsurprisingly, proved especially adept at bringing Australian companies to the US market. Citi has proven to clients that it can close SEC deals or 144A deals, covered bonds or plain vanilla, bank debt or corporate transactions.

But the bank has not entirely relied on its rock solid US division to win business among clients in Australia: it also took borrowers to other markets and currencies throughout last year.

Perhaps most eye-catchingly, the bank helped find Rmb1.5bn of demand for a five year offshore renminbi deal for Fonterra, closing the biggest and longest-dated dim sum bond by any Australasian borrower yet.  The bank also found demand for a Nkr900m 15 year private placement on behalf of SP Ausnet, the first time Citi has brought one of its Australian clients to the Norwegian krone investor base.

As well as these smaller markets, Citi has proven able to bring Australian borrowers to the euro-denominated market, as it did last year for CSL and Melbourne Airport, among others. It is this ability to move beyond its impressive stronghold in the US market and open up other markets for its clients that has made Citi standout from the crowd this year, and has made the bank a natural choice for best international bond arranger of 2014. 


EQUITY

Best Equity-Linked Deal

Bendigo and Adelaide Bank's A$292m CPS2 tier one

Bookrunners: Australia and New Zealand Bank, Evans and Partners, Goldman Sachs, Morgan Stanley

Australia's capital markets are not known for boasting a host of equity-linked deals. This is partly because local investors have not put in the work to create a widespread understanding of convertible and exchangeable bonds. It is partly, by the same token, because the lack of supply has not given fund managers enough incentive to educate their teams about the product. That has left, this year at least, the award for the best equity-linked deal going to a transaction that will — in large part — have been sold to debt investors.

Bendigo and Adelaide Bank managed to boost its capital levels at the start of October, after closing a A$292m tier one transaction that was structured as a perpetual bond that can be converted into stock eight years after issuance, or exchanged into shares a few months after that as long as the regulator gives its approval.

The conversion will take place if Bendigo and Adelaide Bank's common equity ratio falls to or below 5.125%, or if the Australian Prudential Regulation Authority warns the bank it risks becoming non-viable. Investors will, however, likely see this deal as giving them just six year exposure to the bank — entirely in the form of debt — since that is when the bonds are callable for the first time.

The Basel III-compliant deal attracted a mix of investment from new buyers and noteholders in the bank's convertible perpetual securities. The strong support allowed the bookrunners to increase the size of the deal from a mooted A$250m to a final size of A$292m, with the final spread set at 310bp over the 180-day bank bill rate.

This may not be the bread-and-butter equity-linked business that bankers in other jurisdictions would recognise, but the issuer and its bankers certainly deserve plaudits for using an equity-linked structure to find a alternate source of bank capital.

Best IPO

Medibank Private Ltd's A$5.679bn IPO 

Bookrunners: Deutsche Bank, Goldman Sachs, Macquarie

There can be few deals in any market that quite dominated their landscape as much as Medibank Private's IPO did in Australia's equity market this year. The Australian government's privatisation of the health insurer was the biggest IPO in the country since 1997 and managed to attract more than A$17bn of demand from retail investors alone.

The deal generated enough demand that the government was able to push up the price beyond what it had initially hoped for. The bookrunners initially approached investors with a price range of between A$1.55 and A$2 per share, but after it became obvious that there was strong demand for the transaction, they pushed that up to between A$2.00 and A$2.30. The listing ended up pricing in the middle of this final range, although retail investors were sold shares at A$2.00 each.

The deal, which was being discussed as far back as 2006, does not look likely to lead to a rash of large privatisations from the federal government. Indeed, Australia's prime minister, Tony Abbott, has balked at suggestions that he is planning to sell off public television networks ABC and SBS. But the success of this deal may have given some government officials pause for thought. It is clear that, with the right bookrunners, the government can certainly get bang for its buck.

The bookrunners used a clever strategy to generate early momentum, promising preferential allocation to those investors who placed orders within the first 24 hours. That helped drive a wildly successful deal, ensured the government got exactly what it needed from the transaction and guaranteed that Deutsche Bank, Goldman Sachs and Macquarie would win very public plaudits from those keeping a close eye on the IPO market in the country.

Best Follow-on/Accelerated Bookbuilding

Transurban's A$2.34bn accelerated renounceable entitlement offer

Bookrunners: Goldman Sachs, Morgan Stanley

Transurban, part of a consortium of bidders hoping to take over Queensland Motorways last year, needed funding to complete its part of a A$7.057bn financing package. The toll-road company was eyeing a major entitlement offer if the deal looked like going ahead, but it needed to secure funds before making an offer with its bidding partners. Most companies would consider a bridge loan as the most obvious solution to this conundrum, but Transurban's bankers presented a different option.

The bookrunners offered a hard underwritten entitlement offer at the maximum possible discount, offering to let this agreement stand for 30 days, although it soon converted into a fixed-price underwrite after Transurban was picked as one of the successful bidders for Queensland Motorways. The entitlement offer ended up proving a major success after that, getting a 95% take-up from institutional investors.

The success of the entitlement offer would have always made this an obvious candidate for this award, but it is the willingness of the company's bankers to offer a hard underwrite on the deal to allow it to avoid the need for a bridge loan that truly makes the transaction a rightful winner. This is a classic example of banks being willing to put their balance sheets on the line, but having the market savvy to ensure that — when the dust settles — they have not ended up footing the bill.

Best Equity House

Macquarie Capital

Macquarie Capital managed to win this award for the second year in a row in large part because the bank focused on what it is best at: bringing eye-catching IPOs to the market, and making sure they close with a bang.

Macquarie Capital did not manage to grab a firm place at the top of the league table last year — that honour went to Goldman Sachs — but it has certainly done enough to win plaudits for an impressive performance. Both Goldman Sachs and Macquarie worked on the huge listing of health insurer Medibank Private, giving them the bragging rights of working on our IPO of the year (see above).

But Macquarie also managed to win a place on Healthscope Limited's A$2.255bn IPO, a smoothly-executed deal that many bankers argued was the most impressive listing of the year despite not quite matching the size of Medibank.

The Australian bank also proved much more active than its US rival last year. Although Goldman Sachs managed to top the Dealogic ECM league table, with US$6.2bn of deal volume compared to the US$5.7bn closed by Macquarie, it worked on less than two-thirds of the deals that its rival did. Macquarie featured on 38 deals in 2014, against the 21 deals managed by Goldman Sachs.

These numbers are not everything — indeed, Goldman deserves some plaudits for winning deals that, on average, are much larger — but they go to show the widespread grip Macquarie has managed to take on the country's ECM market.

Macquarie, which says it has the largest ECM team in Australia, has proved once again to be the very best in the country at navigating the ECM markets. By helping bring to the market several deals that have offered eye-popping returns, it has kept investors happy. But by bringing those deals in the first place, and smoothing the transition to the market for companies large and small, it has ensured it will be among the first phone calls for any company considering the market — and that will stand the bank in good stead in this category for many years to come.

 

LOANS

Best Project Finance Deal

Roy Hill Iron Ore Project US$7.2bn project finance

Mandated Lead Arrangers: Australia and New Zealand Banking Group, Bank of China, Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Commonwealth Bank of Australia, HSBC, ING Bank, Industrial and Commercial Bank of China, Korea Finance Corp, Mizuho Bank, National Australia Bank, Oversea-Chinese Banking Corp, Société Générale, Sumitomo Mitsui Banking Corp, Westpac Banking Corp

The sponsors behind Roy Hill, an iron ore project in the Pilbara region of Western Australia, turned to their bankers two years ago with an ambitious plan. Not only did they want to raise a whopping US$7.2bn to help fund the completion of a greenfield project, but they wanted to do so without offering completion guarantees to lenders. To make it even more difficult, potential lenders had to get their heads around not just the iron ore project, but two related infrastructure projects as well.

It is a testament to the strength of Australia's banking system – and the clear vision of the sponsors – that these challenges proved, in retrospect, to not be that difficult after all. The sponsors went out to export credit agencies in December 2012, turned to commercial banks in September 2013, and finalised documentation for the deal in March last year. In the process, they managed to close the largest ever project financing for a greenfield mining project.

The deal was backed by a subordinated loan provided by the sponsors, and came with a novel repayment structure that allows the project — as it moves to full production — to repay relatively small amounts and pay back larger chunks only when it can afford to do so. The package also gives Roy Hill the flexibility to pay dividends to its equity holders during this period, as long as certain conditions are met.

Bankers pointed to this repayment structure, as well as the quick turn-around of the financing, as the major points that made this deal such an impressive project financing. The record-breaking size is only the icing on the cake.

Roy Hill may have tested banks' capacity and flexibility with this deal but, in the end, that passed that test with flying colours.

Best Syndicated Loan & Best Leveraged Finance Deal

Aristocrat Leisure's US$1.3bn US term loan B 

Bookrunners: Bank of America Merrill Lynch, Citi, Nomura, UBS

Gaming products company Aristocrat Leisure, which produces slot machines and casino management systems, took a gamble of its own last year when it decided to become the first Australian-listed company to target the US leveraged loan market to help finance an acquisition. But the company had weighed up the risks carefully – and when it came to closing, it was clear Aristocrat had hit the jackpot.

The company signed an agreement in early July to buy Video Gaming Technologies, a US company that has a stronghold in tribal-leased casinos in North America. That appeared a sensible expansion by a company that has already spread its business outside Australia to more than 90 countries in the world, but Aristocrat still had to figure out how to finance the takeover. After weighing up its options, the company turned to the US Term Loan B market — and the deal it ended up with could serve as a textbook example to other borrowers of the benefits of US-targeted leveraged loans.

The company managed to raise US$1.3bn from a seven year deal, getting away not just with a covenant-lite structure but also with the ability to repay the loan early at any time. The deal – which came alongside a A$375m equity placement – was also reasonably quick, taking less than three months to close.

The quick turnaround, the impressive size and the decent pricing of the deal make this an obvious winner of the best leveraged finance deal. But it is the perfect fit between the deal and the use of proceeds, and the skilful execution of bankers who convinced the borrower to loosen its pricing expectations during syndication, that makes this the best loan of the year.

There have been other chunky Australian loans this year, and there have been ones that have beaten this pricing. But there have been none that gave the borrower that perfect mix of funding, pricing and flexible terms that Aristocrat managed to achieved with this cov-lite deal.

Best Loans House

Australia and New Zealand Bank

It is well known among international bankers that Australia's four biggest banks keep a tight grip on the domestic loan market. Between them, Australia and New Zealand Bank, Commonwealth Bank of Australia, National Australia Bank and Westpac Banking Corp provide more than half of all the bank loans in the country. They each lend out more than four times that of what their nearest rivals can manage.

It is also well known, but less acknowledged, that at the top of the big four sits ANZ. The bank is rightly lumped in with the other three banks when funding officials survey the groupings among the 10 or 20 biggest lenders in the country. But when only the top four are in focus, ANZ emerges on its own. The bank worked on 49 loans worth more than US$11bn last year. Westpac, its nearest rival, closed 36 loans worth US$8.6bn during the same period.

This dominant position is partly because ANZ has invested in hiring some of the best bankers inside and outside the country — and has made sure to build a huge loans team. But it is also a consequence of an acknowledgement among clients that ANZ is one of the sharpest banks around when it comes to structuring loans. The bank worked on the monster A$8.6bn loan for Origin Energy last year, becoming the only domestic lead on a deal that won it major league table credit. But it is some of the smaller loans that really demonstrate ANZ's skill in the local market.

To take one prominent example, the bank was the sole bookrunner, underwriter and mandated lead arranger on the US$550m five year loan for GS Coal, a joint venture between Glencore and Sumitomo. It was a novel transaction for Glencore, being the first time that company had ever completed a non-recourse loan, despite it being a well-known name among bank lenders. 

It is deals like this that have made ANZ a go-to bank for potential borrowers in the country — and that have, in turn, made ANZ the obvious candidate for best loans house in the country.

 

M&A and Investment Bank

Best M&A Deal

Transurban, AustralianSuper and Tawreed Investments’ A$7.057bn acquisition of 100% of Queensland Motorways from Queensland Investment Corp

Advisers to QIC: Macquarie Capital and UBS

Advisers to Transurban, AustralianSuper and Tawreed Investments: Aquasia, Goldman Sachs, Morgan Stanley, Lazard

It will come as little surprise to bankers that the A$7bn-plus takeover of Queensland Motorways' toll-road network by a consortium of buyers has won this award. The deal was among the most frequently-pitched deals in any category. It was also something of an obvious candidate, after becoming the biggest transport infrastructure merger and acquisition in the country's history.

But that is not to say there was no competition for the award. Westfield Retail Trust's merger with the Australia and New Zealand businesses of Westfield Group, the biggest real estate M&A in the country in a decade, was certainly up for consideration. But although the Westfield merger had its challenges, the sheer number of actors in the Queensland Motorways deal appeared to make this a harder transaction for advisers.

The buying consortium proved to be an interesting mix of investors that each had their own objectives going into the transaction. Transurban was already the largest toll-road operator in Australia before this deal, and had an obvious incentive to boost its toll-road assets by adding the 70km of roads that Queensland Motorways held.

AustralianSuper is one of the biggest infrastructure investors in the country, with an infrastructure portfolio of around A$7.8bn, according to bankers. Tawreed Investments Limited, for its part, is a subsidiary of the Abu Dhabi Investment Authority, and was on the lookout for more Australian infrastructure investments to add to its growing portfolio.

These bidders managed to find common ground to be the winning side on the largest transport infrastructure M&A deal in history. They also managed to find just the right price to seal the deal — local press reports claimed the next highest bid was only around 1% lower than that made by the consortium. By getting in the record books, calibrating a bid so close to the rivals and juggling the incentives of a number of different players, the advisers on this deal must get credit for helping complete the most impressive M&A in the country throughout the year.

Best M&A Adviser

Goldman Sachs

Goldman Sachs had a great year in Australia over the course of last year, and the bank's M&A team has to take a lot of the credit for that. The bank not only managed to secure the top spot on the league table of both announced and completed deals, it also managed to secure a spot on the most eye-catching deal of the year.

Goldman Sachs was picked to work on US$48.86bn of deals that were announced during 2014, a whopping 47% more than Macquarie — which was second in the league table — managed to win. The US bank also took the top spot on the list of banks that worked on deals that closed over the course of the year, this time just pipping UBS to the top spot.

The bank has managed to perform so well in the market in part because it is trusted by Australian executives to give them outstanding advice on cross-border mergers and acquisitions, in particular on tie-ups with Chinese and American companies. But Goldman Sachs has also scored with purely domestic M&A deals. The bank points out that it is, far and away, the leading M&A adviser for defence companies in Australia.

Among the most prominent deals it worked on this year, Goldman Sachs managed to win a place on Transurban, AustralianSuper and Tawreed Investments’ acquisition of Queensland Motorways from Queensland Investment Corp, being chosen as an adviser to the buying consortium. That deal wins our Australia M&A deal of the year for 2014 (see above).

But after other high-profile appointments from State Grid, Envestra, Westfarmers Insurance and Macquarie Generation, among others, it is clear that Goldman's grip on the local M&A market goes a lot further than one, flashy deal. The firm has invested in building a team that can give sound advice to companies in a variety of industries. That investment is paying off.

 

Best Investment Bank

Goldman Sachs

Goldman Sachs had a glittering year in the Australian markets in 2014, advising on some of the biggest M&A deals throughout the year, taking the top spot on the ECM league tables, and breaking into the top 10 of local bond bookrunners. But it is the overall improvement in the US bank's business that really turned heads last year. Goldman Sachs managed to pull off a growth in its investment banking revenues that was so impressive it would have even caught bankers at the firm by surprise.

Goldman Sachs worked on some impressive deals last year, advising Transurban, AustralianSuper and Tawreed Investments on their acquisition of Queensland Motorways, helping manage every offshore Basel III-compliant deal from Australian banks, and helping manage the huge listing of Medibank Private. But the clearest argument that the US bank had such a good year comes from simply taking a look at the numbers.

The bank has still not quite reached the level of UBS in the Australian market. The Swiss bank is the very definition of a full-suite investment bank, proving an impressive and domineering rival to any firm that wants to eat away at its revenue. But although UBS still pulled in the most fees in the market this year, it posted much smaller growth levels that its plucky US rival.

UBS managed to generate US$226m of investment banking fees from the Australian market last year, an improvement from the US$207m the bank earned in 2013, according to Dealogic. That represents a growth of around 9%, an impressive return by anyone's reckoning. But Goldman Sachs managed to increase its own revenue pool by more than 75% over the same period, pushing its investment banking revenues from US$101m in 2013 to US$177m last year.

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