This year, FIIG reached a milestone of more than $1 billion raised via FIIG arranged bond issues
This remarkable achievement has answered the growing need of Australian corporates to diversify their funding base and has also met our investors’ request for access to a broader range of fixed income investment opportunities.
The settling of the $40 million Ansett Aviation Group issue this week marked the 23rd bond issue and over $1.1 billion of funds raised since our origination business began in 2012 with a $30 million issue by ASX listed cafe equipment financier SilverChef.
Passing the $1 billion mark was not just an abstract accomplishment but one that puts the credibility and sustainability of the market beyond doubt in the eyes of both borrowers and investors, further underpinning its growth.
When FIIG started this journey three years ago the Australian corporate bond market was an exclusive club available to a small number of rated issuers.
Today, because of our work opening the market and now passing $1 billion in issuance, it is a proven and reliable funding source for all types of corporate borrowers and provides dependable income for thousands of Australian investors.
We formed our bond origination unit to pioneer unrated issuance in Australia because our 7,000 investors told us they had an appetite to invest in the debt of local corporates.
At the time, we had already made a significant contribution to the growth of the corporate bond market in Australia though the establishment of our DirectBonds service which enables private investors, SMSF Trustees and professional investors to directly acquire small parcel investments in over 350 predominantly rated bonds that were previously accessible only to institutions.
Our wholesale private investor base was telling us that they wanted quality corporate bonds to add to their Fixed Income allocation and at the same time we were seeing demand for bond financing by Australian corporates who were unable access the rated bond market.
We then started arranging bonds and found that instead of satisfying demand, it was – and is - only growing as investors respond to the success of each issue and the benefits of diversification into the bond market.
We commend the corporates who have worked with us to issue bonds for their willingness to try something new to improve their funding mix and also recognise the leadership shown by our investor base who have been willing to support the debt needs of these corporate borrowers.
The bond issues we have originated vary by size, duration, structure, fixed or floating rate, rated or unrated and for public and private companies illustrating the tailored nature of the funding depending on the requirements of the company and investor demand at the time of funding.
All of the issues have been successful, meeting the originating companies’ target capital amounts and attracting strong investor interest in the secondary market.
Two bonds have been repaid in 2015, with our first issuer Silverchef in 2012 refinancing through a new $300m syndicated debt transaction between five banks, and catalogue printer PMP in 2013 refinancing its original bond with a new FIIG deal.
The FIIG arranged bonds have traded in line with the market, there have been no defaults and all interest and principal repayment obligations have been met.
There are currently over 4,000 unique holders of FIIG originated bonds, including a growing share of retail investors.
The SMSF sector has been an important component of this market development, driven by an increasing allocation to Fixed Income and higher returns in a declining interest rate environment.
The companies that have issued bonds are a varied group from many different sectors covering corporate, property, infrastructure and financials.
Source: FIIG Securities
One interesting trend has been that, banks have become more receptive to the addition of an unrated bond to the balance sheets of their middle-market clients, recognising the benefits of funding diversification.
We have found that there is growing recognition by the banks that bonds help them to retain their capacity to fund liquidity and transactional services, while capturing the bulk of the ‘relationship wallet’ through not having to introduce additional banks to their clients.
All of the major banks and a number of regional banks have provided credit approval for these bonds and the acceptance of bonds as a funding source can been seen in an active and growing pipeline of issues.
The success of the origination business continues to grow, with a strong pipeline of corporates ready to issue bonds as they move to lock in funding while investor demand remains high and interest rates are at record lows.
We look forward to continuing to broaden the range of bonds available in the market and improve access for borrowers and investors alike.
To learn more please visit www.fiig.com.au/DCM.