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Corporate Treasurer Of An Australian Based Property Development, Management And Investment Company

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Question 1 (Approximately 400 words) You are the Corporate Treasurer of an Australian based property development, management and investment company. The organization you work for has undertaken its financing needs via unsecured bilateral and syndicated bank funding loans and via the CMBS securitization markets. The company has just experienced a downgrade in its senior unsecured credit ratings from A stable to A‐ negative outlook due to a reduction in earnings from record low levels of new property development and constrained earnings. The business is relatively unknown outside of Australian and has not borrowed in offshore capital markets before. A decision needs to be made on refinancing options for an A$250m loan due for maturity in 6…show more content…
The primary focus of the company is the A$250m loan due in 6 months. The company has both domestic and offshore funding options available. Domestic funding options: The company can issue bonds domestically through the AMTN market. These are generally fixed rate instruments however floating rate notes and inflation linked options are available if required. The company still holds an above investment grade credit rating. There has been strong activity in the domestic market, recently ConnectEast Finances rated Baa2 issued A$300m 165 basis points over semi-quarterly swap . Offshore funding options: The company can also issue bonds in offshore markets to raise funds including the EMTN, US PP, US 144A and US Public market. Recent Australian companies to issue in these markets include Ausnet (€560m Euro market), Fortescue (US$2.5bn senior secured issue US PP), BNZ (Benchmark, 144A programme). The US Public and 144A markets are not suitable options for the company as both have significant legal costs and minimum issues sizes of US$500mio. The most viable offshore options are the EMTN and US PP market. Summary of options: b) How would you order these alternatives? The following rankings have been determined based on the firms needs to refinance, previous financing strategies, current credit rating, being unknown outside of Australia and not previously borrowing in offshore capital markets. c) What are the implications associated with
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