Apple’s Kangaroo debut smashed a plethora of domestic records and was the clear choice as Asian currency bond of the year.
August’s A$2.25bn (US$1.6bn) offering put the Australian dollar market firmly on the map as an alternative funding currency for the world’s top corporate issuers, proving that the Kangaroo market can compete on size, as well as price.
Apple’s debut, as well as being Australia’s biggest corporate bond, was the first corporate Kangaroo to go out to seven years and the first to include multiple tenors.
The deal dwarfed all previous Australian dollar issues from non-financial companies.
It more than doubled the previous record as the largest corporate bond in Australian dollars, trumping two separate A$1bn issues from local mining giant BHP Billiton. The previous largest corporate Kangaroo bond raised just A$500m.
DCM bankers have long sought to lure to the local fixed-income market a greater portion of Australia’s US$1.7trn pension pool, and Apple’s trade added to the growth in orders from the country’s middle-market accounts, including small funds, councils and charities.
“While Apple represents the cream of the crop with its extraordinarily strong balance sheet and high ratings, it shows there is plenty of appetite for A$1bn-plus corporate trades from the right names,” said an Australian fund manager, who participated in the issue.
The scale of Apple’s success clearly caught the attention of other global issuers, and top names, such as Ford and Intel, have since turned to the currency.
Apple priced in line with its US dollar curve and just inside its euro curve, while offering healthy pick-ups over its Australian comparables, persuading domestic fund managers, drawn to Apple’s status as a rare blue-chip technology issuer, to lap up 60% of the bond.
Joint lead managers CBA, Deutsche Bank and Goldman Sachs drew plaudits for their choice of tenors and competitive pricing levels, which helped ensure a remarkably smooth execution process.
Rather than the more typical five-year tenor, maturities of four and seven years provided investors with two distinct options, allowing Apple to appeal to the broadest possible audience.
Generous initial guidance secured an order book in excess of A$3bn, which slipped only slightly with a 5bp tightening of guidance.
Completing the trade’s all-round feel-good factor, Apple’s Kangaroo investors have seen their bonds outperform in the secondary market, in contrast to the company’s inaugural US$17bn issue in 2013, which famously tumbled as Treasury yields spiked higher almost immediately after pricing.
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