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Australia's property firms line up to sell bonds

SYDNEY: Australian property borrowers are queuing up to sell bonds, seeking to diversify their funding and spread out maturities to strengthen their balance sheets after being scarred by the global financial crisis.

In addition, with stricter capital requirements due under Basel III, banks are expected to hike their lending rates to corporate borrowers, making bond markets a more attractive funding option.

Property firms will be hit even harder since they have less financial flexibility than other sectors due to stricter prudential requirements.

"It's a combination of banks wanting to reduce their exposure [to property] and when they have an exposure, to change the way they price that exposure," said Craig Parker, a credit analyst at S&P.

Mirvac Group, Dexus Property Group, Australand Property Group and Goodman Group have all recently signaled plans to sell bonds.

Property developer Mirvac, a regular borrower in the once vibrant Australian securitisation market, is currently looking to refinance debt, including a A$200 million (RM574.04 million) bond maturing in September, a company spokesman told Reuters.

The firm is considering all markets — including Australian dollar bonds, eurobonds, US private debt and bank loans, he said. The company has not made a decision and has not mandated banks, he added.

Mirvac, which sold earlier this year a A$150 million bond issue to refinance debt, is also a familiar borrower in the US traditional private placement, a popular source of funds for Australian firms keen on long-dated debt.

Mirvac is rated BBB by Standard & Poor's.

Dexus Wholesale Property Fund, a unit of Dexus Property Group, signalled last week its intention to raise debt when it was assigned an A credit rating by S&P to allow the firm to access capital markets.

"[The fund] intends to refinance its A$250 million bank facility, which matures in February 2011, in a timely manner and we are currently considering our options in this regard," Dexus Fund Manager Graham Pearson said in a statement emailed to Reuters on Wednesday, Aug 11.

The firm declined to give details such as timing, joint leads or type of debt Dexus is considering.

Dexus will update Australian debt investors on its earnings in the week of Aug 23. The presentations, arranged by ANZ and Commonwealth Bank of Australia, will take place on Aug 23 in Melbourne and Aug 26 in Sydney, according to a company spokeswoman.

In July, Australand, a diversified property group owned by Singapore's Capitaland, flagged its intention to tap European investors with the establishment of a euro medium term note programme to improve access to longer-dated funding.

Australand is not publicly rated.

Moreover, Australia's largest listed industrial property firm, Goodman Group also has plans to refinance debt.

In May, the real estate firm said it would look to replace large debt maturing in 2013 in the international bond markets.

Goodman's BBB rating by S&P is on negative outlook because of high debt levels. This means the firm is in a state of heightened surveillance by the rating agency which is looking for debt reduction. — Reuters
Australia's property firms line up to sell bonds
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