Asiamoney Australia Awards 2014: the brightest and the best

Resimac Premier Series 2014-1 A$750m dual-currency prime RMBS

Bookrunners: JP Morgan, NAB

There were certainly bigger deals last year than Resimac's A$750m prime RMBS deal that was sold at the end of May. Commonwealth Bank of Australia's Medallion Trust Series 2014-1, for instance, raised a whopping A$4bn in the middle of September. Westpac's Series 2014-1 WST Trust raised A$2.5bn in May. But there was surely no other deal in Australia's RMBS market that showed the possibilities available to borrowers quite as much as Resimac did when it attracted US investors to a term RMBS tranche.

US investors are no strangers to Australian RMBS deals, but they typically want to buy bullet tranches, which have well-defined maturities. This helps them limit their exposure to the underlying assets, and gives them a firm idea of when they will get their money back. But it also limits the appeal of these investors to originators that largely want to fund through amortising notes that are paid off as the underlying mortgages pay back.

Resimac's funding team managed to overcome the reluctance of US investors to take this term debt, and showed the true potential of the offshore investor base in the process. US investors proved willing to buy a US$200m amortising structure that gave them a weighted average life of 2.9 years. The triple-A rated, US dollar tranche — which paid investors a spread of 70bp over three month dollar Libor — was the first of its kind since the global financial crisis.

The deal got strong demand from Australian investors, allowing Resimac to increase the size to A$750m from an intended A$500m. But the key takeaway for bankers was the strong demand from the US market. They now think the deal has established a template which other originators will be able to use to get term investment from US accounts. That, in itself, surely deserves an award.

Scentre Group's €2.1bn multi-tranche bond

Bookrunners: Barclays, BNP Paribas, Deutsche Bank, HSBC

The management of Scentre Group could not be accused of wasting time. The company was formed from a merger between the Westfield Retail Trust and the Australia and New Zealand assets of Westfield Group — and before the ink on the merger agreement was dry, funding officials from the newly-created company were on the road meeting bond investors. Perhaps even more impressive was the type of investors the company chose to appeal to.

Euro-denominated deals from Australian corporations are still something of a rarity in the global capital markets, and sterling denominated transactions even more so. But Scentre Group chose not to go for one or other of these markets, but to combine both at once, selling a deal with euro and sterling tranches after a roadshow that took the management to London, Paris, Frankfurt, Edinburgh and Amsterdam.

The management appeared to have their work cut out for them on the road, hoping to explain to investors a new company structure that had only become effective the day the roadshow began. But investors were already familiar with the operations of Westfield Group and, in the end, getting a decent grasp of the newly-formed company did not prove an insurmountable challenge.

The bookrunners managed to drum up €5bn of demand for the deal, an impressive order book for a transaction that ended up being worth €2.1bn. The final amount was split between a €400m four year tranche, a €600m six year issue, a €600m 10 year note and a £400m 12 year bond, with all of these tranches pricing at the tight end of guidance.

Australian Commonwealth Government's A$7bn 2037

Bookrunners: Australia and New Zealand Bank, Citi, Westpac, UBS 

The Australian Office of Financial Management, the borrowing arm of the Commonwealth of Australia, could be forgiven for thinking that this award is theirs to lose in the years to come. The funding team won this award last year, after closing a A$5.9bn 2033 bond that was, at the time, the biggest local bond in the country's history.

They have scooped it again this year by closing a deal that easily eclipsed the size of that transaction.

The A$7bn bond was not the longest tenor ever issued in the local market, but it has pushed the maturity curve into uncharted territory, moving it past the 2033 bond priced in 2013. It was also one of the most successful deals in recent memory when it came to appealing to new investors. Bankers working on the deal said it had the largest participation of real money investors in an Australian government bond in the last three years. They also said the government managed to appeal to investors outside of its traditional investor base, including appealing to some south American accounts.

The deal can lay claim to being the biggest sovereign bond in Australian history, but it will have to share that honour. The Commonwealth of Australia sold a A$7bn bond earlier in the year, opting for a maturity of 2026 for that deal. That transaction no doubt helped pave the way for this longer issue, allowing the bookrunners to build more than A$10bn of demand after holding the books open overnight and price the transaction at a spread of 62bp over the exchange for physicals price.

The bond ended up being split 55%-45% between onshore and offshore accounts, after particularly large demand from investors in Asia and the United Kingdom. The strong order book has proved beneficial to investors in the aftermarket: the deal tightened by around 5bp at the end of last year, according to bankers.

Bendigo and Adelaide Bank's A$292m CPS2 tier one

Bookrunners: Australia and New Zealand Bank, Evans and Partners, Goldman Sachs, Morgan Stanley

Australia's capital markets are not known for boasting a host of equity-linked deals. This is partly because local investors have not put in the work to create a widespread understanding of convertible and exchangeable bonds. It is partly, by the same token, because the lack of supply has not given fund managers enough incentive to educate their teams about the product. That has left, this year at least, the award for the best equity-linked deal going to a transaction that will — in large part — have been sold to debt investors.

Bendigo and Adelaide Bank managed to boost its capital levels at the start of October, after closing a A$292m tier one transaction that was structured as a perpetual bond that can be converted into stock eight years after issuance, or exchanged into shares a few months after that as long as the regulator gives its approval.

The conversion will take place if Bendigo and Adelaide Bank's common equity ratio falls to or below 5.125%, or if the Australian Prudential Regulation Authority warns the bank it risks becoming non-viable. Investors will, however, likely see this deal as giving them just six year exposure to the bank — entirely in the form of debt — since that is when the bonds are callable for the first time.

The Basel III-compliant deal attracted a mix of investment from new buyers and noteholders in the bank's convertible perpetual securities. The strong support allowed the bookrunners to increase the size of the deal from a mooted A$250m to a final size of A$292m, with the final spread set at 310bp over the 180-day bank bill rate.

This may not be the bread-and-butter equity-linked business that bankers in other jurisdictions would recognise, but the issuer and its bankers certainly deserve plaudits for using an equity-linked structure to find a alternate source of bank capital.

Medibank Private Ltd's A$5.679bn IPO 

Bookrunners: Deutsche Bank, Goldman Sachs, Macquarie

There can be few deals in any market that quite dominated their landscape as much as Medibank Private's IPO did in Australia's equity market this year. The Australian government's privatisation of the health insurer was the biggest IPO in the country since 1997 and managed to attract more than A$17bn of demand from retail investors alone.

The deal generated enough demand that the government was able to push up the price beyond what it had initially hoped for. The bookrunners initially approached investors with a price range of between A$1.55 and A$2 per share, but after it became obvious that there was strong demand for the transaction, they pushed that up to between A$2.00 and A$2.30. The listing ended up pricing in the middle of this final range, although retail investors were sold shares at A$2.00 each.

The deal, which was being discussed as far back as 2006, does not look likely to lead to a rash of large privatisations from the federal government. Indeed, Australia's prime minister, Tony Abbott, has balked at suggestions that he is planning to sell off public television networks ABC and SBS. But the success of this deal may have given some government officials pause for thought. It is clear that, with the right bookrunners, the government can certainly get bang for its buck.

The bookrunners used a clever strategy to generate early momentum, promising preferential allocation to those investors who placed orders within the first 24 hours. That helped drive a wildly successful deal, ensured the government got exactly what it needed from the transaction and guaranteed that Deutsche Bank, Goldman Sachs and Macquarie would win very public plaudits from those keeping a close eye on the IPO market in the country.

Transurban's A$2.34bn accelerated renounceable entitlement offer

Bookrunners: Goldman Sachs, Morgan Stanley

Transurban, part of a consortium of bidders hoping to take over Queensland Motorways last year, needed funding to complete its part of a A$7.057bn financing package. The toll-road company was eyeing a major entitlement offer if the deal looked like going ahead, but it needed to secure funds before making an offer with its bidding partners. Most companies would consider a bridge loan as the most obvious solution to this conundrum, but Transurban's bankers presented a different option.

The bookrunners offered a hard underwritten entitlement offer at the maximum possible discount, offering to let this agreement stand for 30 days, although it soon converted into a fixed-price underwrite after Transurban was picked as one of the successful bidders for Queensland Motorways. The entitlement offer ended up proving a major success after that, getting a 95% take-up from institutional investors.

The success of the entitlement offer would have always made this an obvious candidate for this award, but it is the willingness of the company's bankers to offer a hard underwrite on the deal to allow it to avoid the need for a bridge loan that truly makes the transaction a rightful winner. This is a classic example of banks being willing to put their balance sheets on the line, but having the market savvy to ensure that — when the dust settles — they have not ended up footing the bill.

Roy Hill Iron Ore Project US$7.2bn project finance

Mandated Lead Arrangers: Australia and New Zealand Banking Group, Bank of China, Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Commonwealth Bank of Australia, HSBC, ING Bank, Industrial and Commercial Bank of China, Korea Finance Corp, Mizuho Bank, National Australia Bank, Oversea-Chinese Banking Corp, Société Générale, Sumitomo Mitsui Banking Corp, Westpac Banking Corp

The sponsors behind Roy Hill, an iron ore project in the Pilbara region of Western Australia, turned to their bankers two years ago with an ambitious plan. Not only did they want to raise a whopping US$7.2bn to help fund the completion of a greenfield project, but they wanted to do so without offering completion guarantees to lenders. To make it even more difficult, potential lenders had to get their heads around not just the iron ore project, but two related infrastructure projects as well.

It is a testament to the strength of Australia's banking system – and the clear vision of the sponsors – that these challenges proved, in retrospect, to not be that difficult after all. The sponsors went out to export credit agencies in December 2012, turned to commercial banks in September 2013, and finalised documentation for the deal in March last year. In the process, they managed to close the largest ever project financing for a greenfield mining project.

The deal was backed by a subordinated loan provided by the sponsors, and came with a novel repayment structure that allows the project — as it moves to full production — to repay relatively small amounts and pay back larger chunks only when it can afford to do so. The package also gives Roy Hill the flexibility to pay dividends to its equity holders during this period, as long as certain conditions are met.

Bankers pointed to this repayment structure, as well as the quick turn-around of the financing, as the major points that made this deal such an impressive project financing. The record-breaking size is only the icing on the cake.

Roy Hill may have tested banks' capacity and flexibility with this deal but, in the end, that passed that test with flying colours.

Aristocrat Leisure's US$1.3bn US term loan B 

Bookrunners: Bank of America Merrill Lynch, Citi, Nomura, UBS

Gaming products company Aristocrat Leisure, which produces slot machines and casino management systems, took a gamble of its own last year when it decided to become the first Australian-listed company to target the US leveraged loan market to help finance an acquisition. But the company had weighed up the risks carefully – and when it came to closing, it was clear Aristocrat had hit the jackpot.

The company signed an agreement in early July to buy Video Gaming Technologies, a US company that has a stronghold in tribal-leased casinos in North America. That appeared a sensible expansion by a company that has already spread its business outside Australia to more than 90 countries in the world, but Aristocrat still had to figure out how to finance the takeover. After weighing up its options, the company turned to the US Term Loan B market — and the deal it ended up with could serve as a textbook example to other borrowers of the benefits of US-targeted leveraged loans.

The company managed to raise US$1.3bn from a seven year deal, getting away not just with a covenant-lite structure but also with the ability to repay the loan early at any time. The deal – which came alongside a A$375m equity placement – was also reasonably quick, taking less than three months to close.

The quick turnaround, the impressive size and the decent pricing of the deal make this an obvious winner of the best leveraged finance deal. But it is the perfect fit between the deal and the use of proceeds, and the skilful execution of bankers who convinced the borrower to loosen its pricing expectations during syndication, that makes this the best loan of the year.

There have been other chunky Australian loans this year, and there have been ones that have beaten this pricing. But there have been none that gave the borrower that perfect mix of funding, pricing and flexible terms that Aristocrat managed to achieved with this cov-lite deal.

Transurban, AustralianSuper and Tawreed Investments’ A$7.057bn acquisition of 100% of Queensland Motorways from Queensland Investment Corp

Advisers to QIC: Macquarie Capital and UBS

Advisers to Transurban, AustralianSuper and Tawreed Investments: Aquasia, Goldman Sachs, Morgan Stanley, Lazard

It will come as little surprise to bankers that the A$7bn-plus takeover of Queensland Motorways' toll-road network by a consortium of buyers has won this award. The deal was among the most frequently-pitched deals in any category. It was also something of an obvious candidate, after becoming the biggest transport infrastructure merger and acquisition in the country's history.

But that is not to say there was no competition for the award. Westfield Retail Trust's merger with the Australia and New Zealand businesses of Westfield Group, the biggest real estate M&A in the country in a decade, was certainly up for consideration. But although the Westfield merger had its challenges, the sheer number of actors in the Queensland Motorways deal appeared to make this a harder transaction for advisers.

The buying consortium proved to be an interesting mix of investors that each had their own objectives going into the transaction. Transurban was already the largest toll-road operator in Australia before this deal, and had an obvious incentive to boost its toll-road assets by adding the 70km of roads that Queensland Motorways held.

AustralianSuper is one of the biggest infrastructure investors in the country, with an infrastructure portfolio of around A$7.8bn, according to bankers. Tawreed Investments Limited, for its part, is a subsidiary of the Abu Dhabi Investment Authority, and was on the lookout for more Australian infrastructure investments to add to its growing portfolio.

These bidders managed to find common ground to be the winning side on the largest transport infrastructure M&A deal in history. They also managed to find just the right price to seal the deal — local press reports claimed the next highest bid was only around 1% lower than that made by the consortium. By getting in the record books, calibrating a bid so close to the rivals and juggling the incentives of a number of different players, the advisers on this deal must get credit for helping complete the most impressive M&A in the country throughout the year.