Wesfarmers tap euro bonds for $870m

WESFARMERS has raised €600 million ($870m) in euro bonds — the third such raising the company has completed under its euro medium term note program — taking advantage of the favourable credit market conditions in Europe.

The notes have a tenor of seven years at a margin of 55 basis points over the euro seven-year mid swap rate, and will mature in October 2021. The proceeds of the issue had been fully hedged and would be swapped back to Australian dollars at a fixed coupon of around 4.7 per cent, Wesfarmers said in a statement.

James Hayes, head of fixed income at BNP Paribas in Sydney, said Wesfarmers had seized a good opportunity with this issue in the European market.

BNP Paribas arranged the issuance and was one of the lead active book runners.

“As credit margins in the euro market compressed through September due to large volumes and strong primary market demand, Wesfarmers elected to pursue a new EUR deal,” Mr Hayes said.

The issue has received strong support from investors, despite the recent short-term volatility due to geopolitical events and the departure of Bill Gross from Pimco, said Kate Stewart, director and head of debt capital markets at BNP Paribas.

“Books built steadily with demand from Europe’s top-tier real money investors reaching €1.3bn,” Ms Stewart said, noting that Wesfarmers’ credit strength and high level of recognition in the European markets had underpinned the demand.

The notes were expected to be rated A- by Standard & Poor’s and A3 by Moody’s, in line with the company’s own rating, Wesfarmers said.

They would be listed on the Singapore Exchange.

More Australian companies are expected to turn to the European debt markets over coming months, attracted by the prospect of raising big-ticket, longer-term funds as investor appetite remains weak at home.

Sources say the pricing in the euro market makes it attractive to Australian corporates, particularly at the longer term.

Melbourne Airport will start a euro bond roadshow later this week to test the appetite of European debt investors.