SYDNEY, Feb 14 (IFR) – Gaming company Tabcorp
is poised to continue last year’s revival in Australian
subordinated retail bond issuance, aiming to raise A$200 million
($214.8 million) from a Tier 1, 25-year non-call five retail
bond.
Tabcorp’s offer, with an initial margin to be set following
a bookbuild on February 22, comes after Woolworths, ANZ
and Origin Energy’s high profile transactions
kick-started Australia’s listed fixed income market.
Australia’s largest gaming company, rated BBB+ by SP, is
willing to pay an additional 100bp-150bp over the pricing levels
currently required in the local loan market.
Tabcorp expects the margin to be in the range of 400bp-450bp
over 3-month BBSW (which equates to an annual interest rate of
around 8.4%-8.9%) whereas an all-in loan for a triple B
Australian corporate could expect to print close to 300bp over
swaps.
An annual return of 8.4%-8.9% is clearly very attractive to
retail investors who would currently receive under 6% from
Australian majors’ five-year savings deposits. It has the added
advantage of diversification away from equities.
As far as issuers are concerned, Barry Sharkey, executive
director capital markets at UBS, noted that although senior
paper is obviously cheaper from a pure debt funding perspective,
“subordinated notes enable capital to be used more
strategically, as a form of quasi-equity which provides support
to an issuer’s credit ratings and overall capital management
strategy”.
Tabcorp stated that “the offer will provide a number of
benefits to Tabcorp, including funding diversification,
increased funding flexibility and an extension of Tabcorp’s debt
maturity profile”.
The note offer opens on February 22 after a roadshow and
bookbuild for retail brokers and institutional investors. The
closing date is March 14 for the Securityholder Offer and
General Offer and March 21 for the Broker Firm Offer with the
notes to be issued on March 22.
UBS is structuring adviser and joint lead manager for the
offer with Macquarie and Westpac appointed as joint lead
managers.
Tabcorp issued a senior five-year retail bond in May 2009
when it raised an upsized A$284 million (versus an originally
planned A$200 million) at 425bp over BBSW from Australia’s first
pure corporate bond issuance since November 2007.
Some A$200 million was allotted to institutional investors
and brokers, with the remainder sold to Tabcorp shareholders and
other investors. The May 2014s have subsequently tightened in to
around 220bp over swaps.
Last year Tabcorp demerged from its more volatile casino
operations that were spun off into a separate organisation named
Echo Entertainment Group.
(Reporting by John Weavers at IFR; Editing by Lincoln Feast)