* Aussie retail bonds could hit record A$17 bln in 2013
* 20 small firms in discussion over bond debut
* Self-managed pension fund pools targeted
SYDNEY, Feb 21 (Reuters) - Australia's retail bond market is seeing a strong start this year with companies large and small queuing up to borrow record amounts through higher-yielding placements aimed at individual investors.
At the same time, brokerage firms are grabbing a small, but growing, market share from banks reluctant to lend to non-core clients due to tight capital and liquidity rules in the wake of the 2008/09 global financial crisis.
This year is shaping up as a bumper year with banking research firm East & Partners estimating as much as A$17 billion could be raised. At the same time last year, retail bond issuance had yet to start.
It would follow a record high of A$13 billion sold last year, data from Thomson Reuters showed, as individual investors chase higher returns and companies seek to diversify their source of funding away from banks and large asset management firms.
National Australia Bank, the nation's largest lender by assets, said late on Wednesday it had pre-sold at least A$1.4 billion ($1.44 billion) of listed hybrid notes.
Last week, rival Westpac Banking Corp raised A$1.25 billion of similar securities.
Demand was so high that both issue sizes were more than doubled. They will yield a little more than 6 percent, a level that was on the tight end of the marketing range.
While Australian household names such as telecom firm Telstra, mining giant BHP Billiton or department store David Jones Ltd would be highly sought should they come to market, others far less known could also make an entrance.
"We are mostly looking to bring unrated companies with stable income, those who have been precluded from entering traditional debt capital markets," said Tony Perkins, head of fixed income origination at brokerage firm FIIG.
Bond origination is a new business for FIIG which, along with brokers Bell Potter and Evans & Partners, has been arranging placements for new borrowers which have not been rated by credit rating agencies.
A private wealth manager with direct knowledge of the talks said as many as 20 small-to-medium-sized firms, including industrials and financial concerns, are in discussion to sell debt securities.
He declined to be identified for reasons of commercial sensitivity, adding candidates were considering all types of debt instruments including rated and unrated, listed or privately sold, as well as some featuring equity components such as hybrid securities.
Late last year, Silver Chef, a catering firm with a market capitalisation of just A$158 million, paved the way with a A$30 million debut issue of six-year notes paying a coupon of 8.5 percent.
FIIG, which arranged the offer, said 175 investors snapped up the unrated notes within 24 hours and allowed the issuer to receive committed financing for a far longer period than would be available from major banks.
Indeed, banks across the world have been tightening lending, forcing a number of businesses to look elsewhere for funds. Small and medium firms were particularly hard hit.
While market participants said such borrowers would probably raise less than A$1 billion in total, offers aimed at individual investors are rare in Australia where bond issues are typically reserved for professional asset managers.
But with local government bond yields fetching just 4 percent and the stock market getting expensive, having jumped 27 percent since June, individual investors are being forced to source returns elsewhere.
"Anything with a coupon near 8 percent is particularly eye-catching," said the private wealth fund manager.
Helping demand for retail bonds is a massive rise in the number of Australians managing their own superannuation funds - retirement accounts required by law.
They now account for A$418 billion of the A$1.4 trillion superannuation industry, an increase of more than 30 percent in just five years, government statistics showed.
But with around 80 percent of assets placed in equities, a high ratio by international standards, some retail investors are looking to diversify their holdings.
"There is an increased focus by investors on the stability of returns and capital," said FIIG's Perkins.