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Santander To Issue Kangaroo Bonds
Spanish banking major, Banco Santander plans to start issuing Aussie Dollar Bonds, better known as Kangaroo Bonds, according to JP Morgan. The timing of the decision and the quality of the issuer is another strong signal that the crisis in Australia’s credit markets has finally begun to ease.
Santander, Spain’s largest lender by assets, is a highly rated bank with a strong balance sheet, and other than its stock selling off in line with all banking stocks globally, the lender has little exposure to the US property market. The bank which owns marquee British high street bank Abbey National does have exposure to its own slumping domestic property market however.
Santander is meeting with Australian fixed income investors this week. And plans to establish a Kangaroo bond program largely to diversify its funding base JP Morgan said. JP Morgan is arranging the meeting with Australian investors and is presumable going to manage the offering when it eventually comes to market.
The date for any issue so far has not been set and the amount that the Santander plans to raise has not been defined The bank began meeting Sydney-based bond investors on Tuesday, and hosted further meetings in Sydney yesterday, before moving to Brisbane and Melbourne.
Australia, which under normal circumstances used to be a liquid fund raising source for overseas banks, has been effectively closed to both foreign and domestic issuers for the last couple of months as the global credit crisis froze lending. The decision by Santander to look at Australia as a diversified funding source and begin talks with potential investors is a clear sign that the freeze may be coming to an end.
Also mitigating against foreign bank issuance in Australia has been a sharp move into negative territory by the Australian dollar basis swap, which reflects the cost of borrowing offshore, and a collapse in the Australian dollar itself. A negative basis swap increases the cost of converting Australian dollars into a foreign borrower’s home currency.
The last issuer to test the Australian primary market was Westpac Banking Corp, who raised A$ 1.48 billion of senior debt, which has been the only issue to have come to market in recent months. Westpac is also helping to arrange Santander’s investor presentation along with JP Morgan.
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