Telstra bond shores up balance sheet
Telstra has raised $860m through a bond issue, in a sign global money markets are starting to resume normal service.
Telstra has raised $860m through an overnight bond issue in a further sign that global money markets are starting to function normally following an effective freeze in March.
The telco major secured a €500m ($860m) bond, on a 10-year maturity, to shore up its balance sheet.
Telstra says it will use the proceeds for “general corporate purposes, including the prefunding of future debt maturities”.
Since mid-March Telstra has also secured an additional $940 million in bank facilities, and now has a total of $3.6 billion of committed bank facilities.
Telstra chief financial officer Vicky Brady last month told investors that bond markets had effectively closed, prompting the telco to delay the rolling over of $1.5bn of maturing debt.
Given Telstra has an “A” credit rating from credit agencies, the difficulty in rolling over debt underscored deeper problems in global markets disrupted by fallout from the coronavirus.
Telstra also has another $2.8bn of debt maturing over the next 12 months, but at the time Ms Brady said the telco was “well placed” to cope with the maturing debt.
A global dash for cash by major companies last month has been putting intense pressure on global debt markets.
Central banks around the world have since pumped billions of dollars into money markets to help resume the flow of debt through the global economy.
The Reserve Bank of Australia said recently that bond markets had come under stress as investors dumped bonds in favour of cash, as panic took hold in the wake of the coronavirus outbreak.
Telstra on Friday said the euro bond issue was well below the average cost of funds, with CEO Andrew Penn adding the healthy bank balance demonstrated the company’s health and attractiveness on global capital markets.
“Telstra’s continued access to low-cost capital and A-band credit rating demonstrates the strength of the business during this very volatile time,” Mr Penn said.
Commonwealth Bank head of fixed income and FX strategy Martin Whetton said the strength of bids for Telstra’s offering had seen the bond 10 times oversubscribed.
“They had €5 billion in demand, it brought the spread in about 60 basis points from where they first said they were coming to the market.
“It’s an attractive investment because the price was right for those seeking yield,” Mr Whetton said.
Telstra has an A- rating from credit agency Standard & Poor’s, while Moody’s has an “A2” rating on the telco.
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