Debt Market Update Q1 2018 | KPMG | AU
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Debt Market Update Q1 2018

Debt Market Update Q1 2018

Consistent with every opening quarter since 2001, the first calendar quarter of 2018 experienced a decline in the syndicated loan volume compared to the previous quarter as the market returned from holidays and readied itself for the year ahead. When assessed on a rolling 12 month basis, transaction volume increased by 9.9 percent to US$73.6 billion compared to US$67.1 billion in the corresponding period last year showing signs of continued market strength.

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Key themes

  • Australian bank debt market – expectedly slow start to the year, with the quarter opening with leveraged buyout transactions and more renewable energy projects.
  • Australian domestic bond market – steady opening to the market with issuers continuing to benefit from investor demand, increasingly at longer tenors.
  • USPP – the market continues to work for the domestic borrowers and complement the local markets.
  • Robust pipeline – with several large-scale infrastructure projects in the 2018 pipeline.

Notable transactions

A number of large leveraged buyout transactions, renewable energy project financings as well as general purpose corporate (re)financing contributed to the loan volume in Q1 2018. Notable transactions for the quarter included:

  • Image Bidco Pty Ltd, the borrower for private equity firm Permira Advisers Ltd launched a A$690 million 5-year year LBO loan to fund its takeover of X-ray provider I-Med Pty Ltd. The opening margins are 375bps over BBSY for amortising term loan and 400bps over BBSY for bullet term and revolver tranches.
  • China Merchants became the first Chinese bank to lead the financing of a leveraged buyout in Australia, winning a sole mandate on a A$400 million loan for the acquisition of Real Pet Food Co. The interest margin is 250bps over BBSY, which appears competitively priced, demonstrating strong demand for local credit.
  • Sydney Desalination Plant received A$1.6 billion in funding to refinance its existing debt. The deal contains a A$500 million 11-year Ninja loan underwritten by MUFG and syndicated to Japanese lenders. The A$ tranche pays 170bps over BBSY.
  • The Murra Warra Wind Farm closed A$320 million 5-year project financing to support the development of the project’s first stage (226MW capacity farm in Horsham, VIC). The project is sponsored by RES Australia and Macquarie Capital.
  • Infrastructure Capital Group completed a A$124 million 12-year refinancing for the Mumbida Wind Farm acquisition debt, provided by BNP Paribas and CBA on a club basis. The term of the loans goes beyond the expiration of the project’s PPA with state utility Water Corp (expiry 2028) and sets a precedence in terms of the duration.
  • Bulgana Green Power Hub project (194MW wind farm combined with battery storage) secured A$235 million in project financing in Mar-18. kfW IPEX-Bank is contributing A$101 million of the financing package alongside participation from Societe Generale and the Development Bank of Korea. Project sponsor is Neoen.

Australian syndicated loan volume (US$ billion) chart

Source: Loan Connector (data extracted April 2018) and KPMG Analysis

Australian syndicated loan volume, LTM by sector (US$ billion)

Source: Loan Connector (data extracted April 2018) and KPMG Analysis

Debt Market Quarterly Update

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