* Govt to allow retail investors to access same bonds as
* Potential to see retail bond issues double
* Telco, health firms, retail companies highly sought
By Cecile Lefort
SYDNEY, March 20 Australia's government is
proposing to simplify the sale of retail bonds in a move that
could offer firms an alternative to bank funding and see a large
increase in issuance.
Among the new measures proposed by the Labor government on
Wednesday, the most important one is to allow individual buyers
to access nearly all the same securities as professional buyers
through a listing on the stock exchange.
"That is absolutely fabulous... it has the potential to be a
game changer," said Phil Bayley, an academic and debt capital
market consultant at ADCM.
Unlike New Zealand, Switzerland or Japan, retail bond offers
are rare in Australia where bonds are typically bought by
However, since the global financial crisis hit, the
Australian government has been promoting the nascent retail bond
market as an alternative source of funding for companies.
Efforts have been slowly paying off, with 2013 shaping up as
a bumper year. East & Partners estimates as much as A$17 billion
($17.6 billion) could be raised by December.
The bond listing initiative could see retail issuance soar
to at least A$35 billion per year in the near-term, says ADCM's
Possible borrowers could include telecom companies Telstra
Optus, Vodafone as well as retailer
JB Hi-Fi and health insurance firms Medibank and NIB,
all of which would be highly sought names, according to bankers.
Out of the A$350 billion ($363.8 billion) or so of bonds
outstanding in Australia by non-government entities, less than 5
percent are in the hands of individual investors. That's a
pittance, according to Barry Ziegler, head of retail fixed
income at Bell Potter Securities.
"We are so far behind," he said, pointing to New Zealand's
flourishing retail bond market.
A major impediment for borrowers in Australia has been the
requirement for a costly and time-consuming bond prospectus.
Even as the governmen proposes to simplify this process,
Ziegler would prefer it go farther and require just a term sheet
as is done with professional investors.
Fuelling demand for retail bonds in Australia is a massive
rise in the number of individuals managing their own
superannuation funds -- the national mandatory pension scheme.
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.