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NSW's TCorp breaks ground with Dim Sum debut
November 20, 2014 / 3:32 AM / 3 years ago

NSW's TCorp breaks ground with Dim Sum debut

SYDNEY, Nov 20 (IFR) - New South Wales Treasury Corp broke new ground on Wednesday when it printed the first Dim Sum bond by an Australian semi-government (state) issuer.

The Rmb1bn (US$163m) one-year note priced with a 2.75% coupon, 10bp inside guidance, via a deal arranged by ANZ and Bank of China Sydney branch.

The timing of the deal partly reflected Tuesday’s announcement by the People’s Bank of China, appointing Bank of China, the country’s fourth biggest lender, to clear yuan transactions in Australia.

A day earlier the Australian Stock Exchange and Bank of China reached an agreement to increase co-operation promoting the yuan, or renminbi, as a currency in Australia’s financial markets, including developing yuan-denominated bonds and derivatives that can be quoted and traded on the ASX.

China will also grant Australian banking institutions a Rmb50bn quota under the RMB qualified foreign institutional investors programme and increase the maximum amount the RBA is allowed to invest in China’s interbank bond market to Rmb10bn.

China reached agreements with Germany, the UK, France, Luxembourg, South Korea and Canada to open local RMB trading centres earlier this year.

Triple A rated TCorp’s Dim Sum debut was priced off its existing EMTN programme which had been updated to include the new currency. The state funding arm plans other Dim Sum issues going forward which are likely to be issued off a revised domestic MTN programme.

The leads looked at recent Triple A Dim Sum deals as comparables including British Columbia’s 2.85% two-year and the UK sovereign’s 2.70% three-year.

Orders totalled Rmb1.4bn with Asian investors buying 44% of the note, Europe and the Middle East 32% while Australian accounts took 24%. Banks were allocated 56%, asset managers 21%, central banks 19% and private banks 4%.

The funds were swapped back into Australian dollars with the new bond pricing around 5bp wide of where TCorp could issue one-year paper domestically. The one-year maturity was chosen because it is the most liquid part of the curve for swapping proceeds.

TCorp benefits from the investor and currency diversification that the deal provides but that may not be sufficient reason to tempt other semi governments, who have no natural need for the currency, into the Dim Sum space.

Before TCorp only ANZ and NAB and several Chinese banks’ Sydney branches have accessed the Dim Sum market out of Australia.

Dim Sum issuance could be a useful funding tool for Australian corporates that operate in the Chinese currency, however, following the example set by New Zealand’s largest company.

Fonterra Co-operative Group, the world’s biggest milk producer, issued its second Dim Sum bond in January this year with a 3.6% Rmb1.25bn 5-year sale.

A+/AA- rated Fonterra issued the first Dim Sum bond from an Australasian corporation in June 2011, a CNH300m three-year priced to yield 1.1%.

China is Australia’s largest trading partner with annual two-way trade of approaching US$150bn. (Reporting by John Weavers, editing by Daniel Stanton.)

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