Australia/NZ best deals favour innovation over indulgence

How did FinanceAsia pick the best capital markets deals in Australia and New Zealand in 2018? Find out why these transactions received an Achievement Award.

The 2018 winners of FinanceAsia’s Australia and New Zealand Achievement Awards were announced in December.

When our editors were looking for the best deals of the year, we were mindful of the cautionary mood in Australia.

The government was conducting a public inquiry into misconduct in the financial services sector and we wanted our awards to reflect our philosophy that executing a good transaction isn’t all about size and speed.

The following deals were chosen because they moved the market forward, either by tapping new investor bases, adding depth with longer maturities, or focusing on sustainability.


Viva Energy, A$2.65 billion
Bank of America Merrill Lynch, Deutsche Bank, UBS

In a nervous equities market, bookrunners Bank of America Merrill Lynch, Deutsche Bank and UBS pulled off the largest initial public offering in Australia since Medibank privatised in 2014 with the listing of downstream petroleum company Viva Energy in July. The cornerstone process delivered A$1.2 billion ($850 million) in commitments before the deal roadshow, which then generated more than 70 bids from institutional investors. The final price was fixed at the low end of guidance, highlighting the difficulty of executing such a large deal in soft conditions. After a choppy start, the shares were trading higher by the end of the year.


NextDC placement, A$267 million

The A$267 million placement by data centre operator NextDC in April was not the largest secondary offering in the Australian market in 2018 but it was certainly well executed by sole bookrunner and underwriter Citi. The institutional portion of the placement priced at a zero discount to last close which is exceedingly rare for an ASX200 company. It was also rare to have a strategic investor – in this case, superannuation fund UniSuper – commit to a fixed up-front investment of A$150 million at a variable price. Shares in NextDC rallied by nearly 19% in the two months post execution.


CDH-CGP Consortium acquires Sirtex Medical, A$1.9 billion

Adviser to CDH-CGP Consortium: Lazard
Adviser to Sirtex: UBS

In a year of mega cross-border deals in the retail and resources sectors, the price achieved for Sirtex Medical shareholders in this last-minute bid by Chinese buyers was a premium of 113% to Sirtex’s three-month average price before engaging with bidders. The medical device company paid an A$220 million reverse break fee to terminate an existing scheme of arrangement with early suitor Varian Medical and secure a much higher offer from a consortium of private-equity firm CDH Investments and China Grand Pharmaceutical & Healthcare. The sale was cleverly handled by sell-side advisers UBS, which also tailored the winning bid to address regulatory issues. 


Virgin Australia high-yield 5NC3 bond, A$150 million

Virgin’s debut high-yield Australian dollar deal in May was a small but solid transaction and forms a platform for future corporate issuance in the Australian bond market. Virgin was the first sub-investment grade issuer (rated B2/B+) to raise local currency in the medium-term note market. The airline had previously gone to the US dollar public market but wanted to avoid cross-currency swaps and expand its local investor base. The final price of the A$150 million five-year non-call three deal was set at 8.25%. Domestic investors drove the transaction, accounting for 75% of the final order book.


Sydney Airport 10-year bond, €500 million
Bank of America Merrill Lynch, BNP Paribas, HSBC, Societe Generale

Sydney Airport tapped the international bond markets twice in 2018, firstly with this well-executed 10-year senior secured offering into Europe. The €500 million deal marked the issuer’s return to the euro markets after four years. Demand for the “no grow” transaction peaked at €2.8 billion from 195 orders allowing the syndicates to release price guidance 15 basis points inside initial talk. Ultimately the deal priced at MS+80 basis points. Asset managers led the book, accounting for 72% of total allocations, followed by banks (17%) and insurers (11%). Accounts from the UK and Germany had the greatest appetite.


Xero convertible bond, $300 million
Goldman Sachs, Morgan Stanley

Software company Xero achieved an opportunistic financing in September with a $300 million convertible bond – the first from an Australian issuer in three years. In conjunction with the bond, Xero entered into a call spread transaction with Morgan Stanley to synthetically increase the conversion premium and reduce potential dilution. This was the first significant call spread overlay for a company in the Asia-Pacific. The five-year no-put structure optimised the company’s debt maturity profile and provided it with a war chest for potential strategic acquisitions. The securities were bought evenly by long-only investors and hedge funds.


NRMBS Trust 2018-1 with CBI certified notes, A$2 billion

National Australia Bank

National Australia Bank’s innovative NRMBS 2018-1 A$2 billion issuance included an A$300 million green RMBS bond. The deal was upsized from an initial target of A$500 million and attracted a total of 51 investors, with 18 investors in the green tranche alone. The notes were backed by residential mortgages on properties that meet the Climate Bonds Standard criteria for Australian low-carbon residential buildings. Dedicated green investors took more than 80% of the green notes. The transaction paves the way for other issuers to incorporate green tranches in their future RMBS deals.


New South Wales Treasury Corporation green bond, A$1.8 billion

ANZ, Bank of America Merrill Lynch, National Australia Bank

Following on from Queensland Treasury Corporation’s successful deal last year, the green bond market in Australia had been waiting for another benchmark issuer to raise the bar. The wait ended in November when New South Wales Treasury Corporation issued A$1.8 billion in 10-year Climate Bond certified fixed-rate senior notes. The larger deal size and longer duration added depth and breadth to the green bond market. TCorp’s strong name meant the order book closed with more than A$2.5 billion in demand and limited price sensitivity. The proceeds of the transaction will be allocated to low-carbon transport and water infrastructure projects.


Murra Warra Wind Farm, A$385 million
Financial adviser: Macquarie Capital
Lead arrangers: ANZ, MUFG, SMBC, Westpac

The power output from stage one of the Murra Warra Wind Farm – a 226 megawatt, 61 turbine facility in the state of Victoria – is being sold to a consortium of large corporate energy users via a renewable energy power purchase agreement (PPA). The corporate off-takers include Telstra, ANZ, Coca Cola Amatil, University of Melbourne and Monash University. As one of only a few organisational PPAs, this deal is commended for achieving energy pricing well below the wholesale market. The five-year deal was negotiated and completed rapidly in March with the help of financial adviser Macquarie Capital.


Visy domestic private placement, A$214 million

With Australia sitting on A$2.7 trillion in superannuation savings, the prospect of establishing a private debt placement market seems like a no-brainer. Packaging company Visy showed how it can be done with a ground-breaking floating-rate 10-year placement to domestic capital providers, many of them new to the product. This was the first private placement to be marked to market and the first of this type to use a common terms deed. The order book topped A$214 million after a three-day investor roadshow and a vigorous due diligence process over a period of five weeks.


Bounty Fresh Food acquires Tegel Group, NZ$588 million

Adviser to Bounty Fresh Foods: DeutscheCraigs
Adviser to Tegel Group: Goldman Sachs

The processing of nearly half of New Zealand’s poultry is now in the hands of Philippine poultry producer and downstream food retail business Bounty Fresh Foods following the NZ$588 million ($400 million) purchase of Tegel Group in September. Tegel faced strong competitive dynamics due to overcapacity in the local poultry industry, making the bid from Bounty Fresh even more appealing. The offshore acquirer paid a material premium of 8.4 times forward earnings, delivering significant value to shareholders and allowing cornerstone sponsor Affinity the ability to exit its 45% shareholding in one go.

¬ Haymarket Media Limited. All rights reserved.
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