AUSTRALIA LOAN MARKET REVIEW AND UPDATE - Michael Isaacs APLMA Australia Branch Chairman - Asia Pacific Loan ...
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March 2018
AUSTRALIA LOAN MARKET
REVIEW AND UPDATE
Michael Isaacs
APLMA Australia Branch Chairman
CONFIDENTIALAUSTRALIAN SYNDICATED LOAN VOLUMES 2
AUSTRALIAN QUARTERLY SYNDICATED LOAN VOLUMES & NUMBER OF DEALS
+12% pcp
50 90
45 80
40 70
Loan Volume
35
No. of deals
60
30
50
(A$bn)
25
40
20
15 30
10 20
5 10
0 0
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
2015 2016 2017
A$115bn A$93bn A$104bn
Sector Breakdown
(% Total Volume)
NRG Prop Prop
Prop NRG
4% 11% 12%
NRG 9% Other 17%
24% Other
11% 15% Other
C&A 16%
4% U&I C&A
C&A
49% 5% U&I 4%
U&I DI DI 31%
24% DI
28% 16%
20%
Note: PF: Project Finance. Other: IPO, Leasing, Cap Expenditure etc. DI: Includes TMET. Other: FI and Corporate
Source: ANZ, Bloomberg Thomson Reuters LPC5 YEAR PRICING VS BANK FUNDING COST 3
Observable pricing (5 years) for BBB rated (and unrated equivalent) corporates
400
350 GFC
300
250
bps
200
150
100
50
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
5 Year Observable BBB Pricing Point 5 Year BBB 12 Month Rolling Average Margin (1) 5 Year Bank Rolling Wholesale Funding Cost (2)
1) 12 month Rolling Average Margin = Represent BBB rated plus unrated BBB equivalent credits (as per ANZ risk grading)
Source: Bloomberg
2) Rolling Wholesale Funding Costs = Major Australian Bank Secondary Market Funding Cost (excluding deposit costs and internal funding charges
• Australian bank wholesale funding costs have improved, albeit still above 2014 levels
• Increased lender competition has impacted on pricingCHANGING BANK MARKET 4
ASIAN BANKS CONTINUE TO EXPAND AND CONTRIBUTE
MORE THAN EVER TO AUSTRALIAN LOAN VOLUMES • The importance of offshore liquidity to
Australia Asia Europe North America
100% 7% 8% 9% 8%
the Australian loan market cannot be
11% 10% 12% 12%
% of AUS Loan Volume 19% 12% 10% 18% 16%
underestimated.
80% 19% 15% 13%
60%
18% 13% 21% 23% 22% 27% • Over 65 foreign banks, ADIs,
31% 34%
subsidiaries and representative offices
40% listed by APRA with a presence in
55% 56% 57%
20%
53% 52% 51%
43% 42% Australia (66% of registered entities).
• Many expanding and new banks
0%
2010 2011 2012 2013 2014 2015 2016 2017
still setting up
Source: APRA
Source: Bloomberg
• Growth primarily from Asian and
BOOKRUNNER MARKET SHARE (%) Japanese lenders
Asia Australia Europe North America
80% • This has also pushed in to Bookrunner
70% market share, where more banks now
60% participate at the top level for title.
50%
40% • Analysis only relates to primary
30% syndicated loans, under representing
20% true volume of loans from domestic
10% lenders
0%
2013 2014 2015 2016 2017
Source: BloombergNON BANK LIQUIDITY 5
• E&Y estimate alternate investors to make up around 7% of Australian business lending in
2017
• Expanding beyond traditional structure LBO transactions as offshore structures become
more common:
Leveraged Finance Corporate Finance
• TERM LOAN B • Dampier to Bunbury Gas Pipeline (10yr)
• Iron Mountain (A$250m) • VISY Industries (7 yr)
• Leap Legal Software (A$350m) • Aventus Properties (7 yr)
• UNITRANCHE • PACT Industries (7 yr)
• INOVA (A$650m) • National Storage (7 yr)
• Laser Clinics Australia (A$270m) • TPG Telecom (7 yr)
Real Estate Finance Project Finance
• Numerous development financings: • Western Roads Upgrade Project (OSARS)
• Stretch Senior (50% LVR) • 1st greenfield project bond financing in
• First Loss / Mezzanine Aust
• Unitrache • A$700m; 20yr +
• Challenges for the loan market to deal with:
• Public & Private investors in same facility agreement
• Bank vs Non bank requirements on terms2018 PIPELINE 6
REFINANCE PIPELINE (US$Bn)
$70.0 • Good flow of upcoming maturities in
2019 and 2020
$60.0
$50.0
• Some evidence this is being brought
forward
$40.0 • Amend and Extend based on
US$Bn
$30.0
current pricing trends
• Impact of potential interest rate
$20.0 movements later in year
$10.0
• Significant refinancing task on
$- privatisation bridges, but likely capital
Source: Bloomberg
2018 2019 2020 2021 2022 2023
markets focused
2018/19 REFINANCE PIPELINE BY SECTOR
• Sectors to watch:
• Infrastructure & Utilities
Services & Utilities and • Services and Health
Health Infra • Property
22% 26% • Natural Resources
Diversfieds
12% Natural
Resouces
Property TMET 15%
14% 11%
Source: Bloomberg2018 ONWARD – EXPECTED INFRASTRUCTURE PIPELINE 7
Westconnex Sale (NSW) • Continued importance of infrastructure
to the Australian loan pipeline
Roads
North East Link (Vic) • Minimal privatisation activity going
forward. PPP the driver (unless
Queensland and WA reverse current
Sydney Metro policies).
• Social infrastructure the key sector,
Rail Cross River Rail
but rail project largest spend.
NSW Regional Rail • Likely increased competition for
funding from non bank investors
based on success of Western Upgrade
NSW Social & Affordable
Housing
Vic, NSW & SA Schools
Social
Vic Hospitals
Vic Land Titles (Priv)QUESTIONS? 8
• More banks seeking to establish or increase/upgrading presence in Australia will continue
driving a competitive loan market
• Continued growth of non bank investors in Australia
• Strong refinance pipeline and expansion of Corporates seeking to diversify lending groups
(Private and smaller Corporate, Agriculture)
• A strong year for APLMA leading up to the 20th Anniversary for the Branch!DISCLAIMER AND CONFIDENTALITY 9
This document is issued by Australia and New Zealand Information contained in this presentation is strictly
Banking Group Ltd (‘ANZ’). The information and confidential. It is the property of ANZ. As such, no part
opinions contained in this document (on which ANZ of it may be circulated, copied, quoted or otherwise
may have acted or may act for its own purposes) are referred to another party without prior written consent
published for the assistance of recipients but are not to of ANZ.
be relied upon as authoritative or taken in substitution
for the exercise of judgment by any recipient. While The terms noted in this presentation are subject to
such information and opinions have been compiled or
receipt by ANZ of formal credit approval and
arrived at by ANZ in good faith and from sources
appropriate legal, accounting, tax and technical advice.
believed to be reliable, no representation or warranty,
This is not an offer to finance.
express or implied, is made as to their accuracy,
completeness or correctness, any opinions contained in
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