Investa Office Fund (IOF) issued the first Australian corporate green bond as the BBB+ rated real-estate investment trust diversified its funding channels, pitching the deal in part to investors outside of the domestic market.
The company raised A$150 million late last week, priced its seven-year bond at a yield of 4.262%. That was significantly larger than originally planned. The issuer had eyed a A$100 million deal, but big demand allowed it to increase the bond by 50%. It was only the latest in a successful run of green bonds in Australia.
"The volume of green bonds issued domestically in the past four weeks has put the Australian market on very strong footing," Katharine Tapley, head of sustainable finance at ANZ, told FinanceAsia in a phone interview. "Following the IOF deal, which is the first domestic corporate issuance, I think the market is set to see further issuance across domestic banks, semi-governments and as well as corporates."
Since Stockland Trust Management issued a euro-denominated green bond in October 2014, Australia borrowers collectively have sold $4.2 billion worth of green bonds, according to Dealogic. These issuers have ranged from government agencie and banks to asset-backed securitisation vehicles. Tapley said the property, renewable energy and low-carbon transport sectors in Australia lent themselves well to green bond issuance.
In IOF's deal, the final order book was three-and-a-half times oversubscribed, with majority of the allocation being sold to domestic Australian accounts. Investors in Asia took 15%, while the remaining 4% went into New Zealand.
More than half of the deal was sold to green-focused investors, according a syndicate banker running the deal. By investor type, asset managers took 74%, official institutions 13% and banks 10%. The remaining 3% went into money market funds.
The sole bookrunner — ANZ — initially pitched the bond at 175bp above the asset swap rate, before tightening it by 7bp to 168bp over the swap rate. Final pricing of the April 2024 note was fixed on par on a coupon of 4.262%, according to the company’s statement to the Australia Stock Exchange.
