Auckland Council last week raised $100m for 10.5 years in the Australian debt markets. It was the issuer’s first public debt issue in Australia after issuing debt privately here in 2012.
The debt was raised quickly through two lead managers (ANZ and Deutsche Bank) at Swap + 55bps and YieldReport spoke with Auckland Council to gain an insight into the deal and the reasons behind the issue. The deal was particularly popular with Asian fund managers that took around 75% of the deal with Australian domestic institutions taking the balance. Insurance companies took around 60% of the issue and most of the participants were new investors. Auckland Council is rated AA/Aa2.
The Council primarily funds in offshore markets for tenor (maturity), diversity of funding source and pricing and the timing of this deal emerged for a number of reasons. Andrew John, Funding Manager, Treasury told YieldReport that Auckland Council maintains tight credit spreads in its home market and that this deal “brought Australian credit spreads in line with what we see at home, which is a very positive outcome”. Although the Council incurred some costs in swapping the funds into NZD it was important to diversify the funding base and overall it was “very satisfied with the pricing and distribution” and “the ability to access Asian markets for long end debt”. He said the issue helped fill the gaps in the long end of their maturity profile and believed the transaction would “encourage more Australian investors to participate in future”.
With regard to the existing debt profile and future funding plans, Mr John said that the Council had issued “the equivalent of NZD$1.4 billion in offshore markets (excluding this deal). Those currencies include CHF, NOK, EUR and AUD (a private placement). Auckland Council has NZD$7.3 billion of debt and this is expected to grow to NZ$11.5 billion in the next 10 years”. It was the intention of the Council to fund a third of its debt requirement via offshore markets.
Auckland Council profile
In 2010 Auckland Council began operating as a single council responsible for the city’s 1.4m residents. The new structure replaced 8 councils and 30 community boards and 262 elected officials were replaced by 1 mayor, 20 councillors and 149 local board members that make recommendations and decisions on matters local to their communities. Contrast this with Sydney which has 41 councils in the greater city area and Melbourne with around 31. Sydney’s population is around 4.3m while Melbourne is just over 4m.