The deal was rated Aa1/AA/AA- and was managed by HSBC and UBS.
Having monitored the market for some weeks, Westpac eventually found a window of opportunity on Monday. The deal initially failed to generate much interest among European institutional investors, but despite a disappointing shadow book of orders, the deal gathered momentum once the deal was announced on-screen.
ôInvestors are getting shown a bunch of deals at the moment but not all of them are coming to fruition, so it can be difficult to get them to engage in a transaction. We were sure that the orders would start coming in once something concrete was announced,ö says a source.
The bookrunners released an initial guidance of 45bp over mid-swaps. This was then revised to 42bp, causing a handful of investors to withdraw from the trade.
The premium to offer-side credit default swap (CDS) was 15bp initially, tightening to 12bp when the deal priced. ôThis is more of a premium than we saw on Deutsche BankÆs five-year or Credit SuisseÆs three-year trades a couple of weeks ago, but Westpac does not benefit from the domestic European bid. This means its CDS is trading at tighter absolute levels,ö continues the source.
ôNonetheless, the premium was considerably less than Bank of America (closest non-European comparable) who just issued a seven-year bond at a premium of 20bp to senior CDS.ö
A total of 120 accounts participated in the deal. Investor and geographic breakdown figures are not available, although it is known that one-third of the bonds sold into Asia, while the majority went to European accounts.
The quality of the order book was good, with less than half the bonds sold to banks. Such investors hold these types of bonds for marginally less time than pension fund managers. Nonetheless, central banks acted as an anchor around which other bank treasuries and asset manager demand was built, say sources.
Furthermore, 30% of the investors participated in the deal on an asset swap basis, gaining exposure to a floating-rate coupon via HSBC or UBS and therefore locking in the bonds.