NBN tapping bond market in search for billions in funding

The raise is part of the NBN’s plan to secure $27.5bn by 2024.

The National Broadband Network is tapping the Australian bond market for the first time in the hope of securing several billion dollars in funding.

Working on the raise are ANZ, Commonwealth Bank, Westpac and National Australia Bank. The decision to search for funds from Australian bond investors is part of the NBN’s plan to secure $27.5bn by 2024.

Of that, $19.5bn consists of a loan that needs to be repaid to the federal government within four years.

It is understood that on offer to investors is a five to 10-year bond that is rated A1 stable by rating agency Moody’s and AA negative by agency Fitch.

The bond is expected to have an 1.8 per cent or 1.9 per cent yield across 10 years. Investors were being briefed on the details as of Monday, with meetings scheduled for Thursday or Friday.

The raise will capitalise on the booming conditions for issuers in the Australian bond market

It is understood that the NBN will progressively look for ways to raise funds in the coming years so it has cash on hand if it needs it.

Last year, the government-owned entity secured $6.1bn in a revolving credit facility from a syndicate of 10 local and offshore banks. Market analysts say demand is particularly strong for bonds related to infrastructure.

Given that the NBN is largely complete, investors can receive confidence surrounding certainty of its revenue and earnings.

Another positive factor is certainty surrounding the regulatory environment.

The move to secure funds from debt markets also marks the NBN’s attempts to gain independence.

Expected to throw weight behind the raising are major institutional investors, attracted to infrastructure related to the information technology industry, as the internet becomes increasingly critical amid the COVID-19 pandemic.

The bond raising comes as Singtel’s Optus looks to sell stakes in its Australian telecommunications tower portfolio through Bank of America. Telstra last week also signalled a sale of its mobile towers business. Telstra’s mobile phone assets earn about $200m a year and, based on a 20 times multiple, suggests they could be worth about $4bn in value.

This was part of a corporate restructure that some believe could be the first step towards Telstra positioning itself to eventually buy the NBN.

By the end of next year, the company will operate in three separate divisions, including InfraCo, InfraCo Towers, which includes its mobile tower assets, and ServeCo, which would consist of its products and services.

Some believe a successful raising will offer confidence to Telstra that there are funds available among institutional investors for a major acquisition such as the NBN.