Australian debt capital markets: enhanced conditions and growing issuance volumes

Corporate issuances are on track to surpass the record 3 min read

With $13.3 billion¹ raised by corporates in the Australian corporate bond market in the first half of 2024, the volumes speak for themselves. Our clients are reporting generally favourable issuance conditions, with strong levels of subscriptions, good access to longer tenor and support in secondary markets. After experiencing a few years of lower issuance levels, the Australian corporate bond market is now on track to surpass the record issuance levels of $20.5 billion set in 2017.

In this Insight, we outline the top trends we have observed from advising both corporate issuers and dealers on debt capital market programs.

Background: right place, right time for the market

The convergence of several favourable market conditions has led to increased corporate bond activity on 2024. The RBA's low-cost Term Funding Facility (TFF) helped fuel several years of corporate loan activity, coinciding with muted bond issuance levels. The expiry of the TFF program has seen greater alignment between investor expectations on pricing for bonds and bank debt pricing.

Greater alignment on pricing has provided corporate treasury teams greater flexibility to pursue diversification of funding sources, which anecdotally has been a key driver of increased bond issuance in 2024. Supporting this diversification play is increased levels of demand for longer dated bond debt issued into the Australian bond market, providing both diversification of source and tenor.

Additionally, our clients are reporting strong levels of demand from Asia-based accounts during bookbuild processes, demonstrating regional support for Australian credits and supporting longer dated issuances. 

Australian corporate bond top trends in 2024

We have observed the following trends based on our work advising both corporate issuers and dealers on debt capital market programs with various underlying assets, security packages and ratings:

• General appetite for extended tenor issuances, with more than half of corporate issuances this year being at the 10-year mark. As tenor available from the loan markets extends, the question arises as to whether demand will support even longer tenors of 12–15 years.
• Increased bid appetite from Asia-based accounts demonstrating good support for Australian credit, and supporting longer tenor.
• Favourable tenor, subscription volumes and pricing has resulted in Australian corporate issuers not needing to rely solely on bank markets or offshore capital markets.
• Growing number of fresh debt programs are being established, particularly from corporates (both domestic and international) that have entered the Australian market for the first time.
• Increase in multinational issuers accessing the Australian investor base by establishing Australian dollar debt programs. The debut $1.2bn issuance by global corporate Nestlé, with a significant oversubscription, demonstrated the ability of a globally recognisable name to successfully diversify into the Australian capital markets. We have also seen strong interest from New Zealand corporates and increasing interest from European corporates.
• In addition to interest from European corporates, we have also seen strong interest from New Zealand corporates looking to diversify funding sources and access additional pools of capital.
• Strong interest from infrastructure issuers across Australia. Notably, we've seen increased negotiations around the covenants being offered by infrastructure issuers in their debt programs. This has seen a number of infrastructure issuers successfully reducing the extent of the financial covenant and reporting package.

Recent Australian corporate bond deals

• Nestlé: advised Nestlé on the establishment of its debt programme and $1.2 billion debut Australian bond issuance.
• Queensland Titles Registry: advised the issuer on the establishment of its new debt program and debut $750 million senior secured issuance.
• Flinders Ports: advised on the debut bond issuance by Flinders Ports, a privately owned ports, logistics and container terminal services business.
• Property investment group: advised on updates and uplifts to existing debt programs to facilitate clearing of A$ bonds offshore, including to assist with private placements of A$ notes to Asia-based investors.
• QIC Finance (Town Centre Fund) Pty Ltd: advised the issuer on its $300 million issuance.
• ConnectEast: advised the issuer on its $305m senior secured issuance.
• Chorus: advised Chorus, a New Zealand telecommunications company, on its successful debut AMTN issuance.
• LLBW: advised on the program establishment and debut issuance by Landesbank Baden-Württemberg, a German commercial bank.

We have been actively advising both corporate issuers and dealers on debt capital market programs with various underlying assets, security packages and ratings. If you would like to discuss how we can assist you on a debt capital market program, please contact us below.