Australia

Details

  • Service: Advisory, Transactions & Restructuring, Corporate Finance, Topics, Capital Management
  • Industry: Financial Services
  • Type: Business and industry issue
  • Date: 21/05/2013

Debt Market Quarterly Update

KPMG's Debt Market Update reviews debt market activity and provides insights into the latest trends and the implications for Australian companies.

David Heathcote

David Heathcote
Partner in Charge, Debt Advisory Services

+61 2 9335 7193

dheathcote@kpmg.com.au

Debt Market Quarterly Update: Q1 2013 

The Australian syndicated loan market had a slow start to the year, with deal numbers down for the third consecutive period. Low volumes are being driven by a lack of borrower demand rather than constrained bank liquidity.
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This quarter the volume of bonds exceeded syndicated loans, demonstrating the ongoing trend for borrowers to diversify the mix of bank debt vs. capital market funding. Global demand for fixed interest investments has corporate Australia looking offshore for both increased liquidity and longer tenors.

 

Given the increased level of competition from the corporate bond market (and offshore alternatives), thin deal flow and lower cost of wholesale funding for banks, we expect these factors to contribute to ongoing lower margins for investment grade credits in the bank loan market.


With respect to the corporate bond market, the spread between each credit band has widened, with the exception of AAA and AA credits which largely represent government and financial institution issuances.

 

            Key themes

        • Australian loan market falls to its lowest level for 3 years despite growing levels of liquidity from banks.
        • Emergence of Social Benefit Bonds in Australia.
        • Lease accounting changes on the horizon.
        • Is it time to consider exiting unfavourable interest rate hedges?
 

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