Treasury Corporation of

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1 Investors attract TCV to green-bond arena The first Australian semi-government issuer to bring a green bond to market says the genesis of its transaction lay in investor demand for the product. But it hopes to become a repeat issuer despite a limited funding requirement. Treasury Corporation of Victoria (TCV) sold A$300 million (US$228.9 million) in its inaugural green-bond transaction on July 19, via lead manager National Australia Bank (NAB). The issuer says it has a significant stock of certified green assets and is willing to return to the green-bond market. TCV has been scoping green-bond issuance options for some time with the full support of its state government. But Justin Lofting, general manager, treasury at TCV in Melbourne, says the process was driven by demand rather than policy. For TCV the idea originated largely from the investor base, he confirms. With the increasing development of SRI [socially responsible investment] mandates and the lack of suitable investment options for them specifically within the green space investors were looking for alternative investments. Lofting credits previous Australian dollar green bonds for establishing sound precedents for local issuance. Two international supranational, sovereign and agency issuers and two of Australia s bigfour banks have placed local green-bond deals since the market opened in April Lofting points to NAB s deal the first by a domestic issuer as the real door opener. TCV was a natural first mover in the Australian semi-government space, Lofting adds. When we combined this investor demand with the Victorian government s agenda to invest in climate-change mitigation and adaption strategies, the issuance of a TCV green bond provided a unique opportunity to meet both our investor and stakeholder requirements. FOR THE DEVELOPMENT OF THE MARKET I THINK IT IS IMPORTANT FOR ISSUERS AND INVESTORS ALIKE THAT WE MINIMISE BARRIERS. IF INVESTORS OR ISSUERS START DEMANDING A PREMIUM IT WILL INHIBIT THE MARKET S GROWTH. JUSTIN LOFTING TREASURY CORPORATION OF VICTORIA Structure and programme TCV s first decision was to issue a green bond under the Climate Bond Standards a practice that has become the norm in the Australian dollar market. The local bank deals in particular established a framework for the development of the market in Australia, such as the use of a third-party, independent certification process, Lofting explains. Deal size was always likely to be limited in any TCV debut, if only as a consequence of the issuer s limited termfunding requirement. A state government operating surplus and the windfall benefits of the Port of Melbourne lease have combined to leave TCV with a termfunding programme of just A$2 billion for 2016/17 and Lofting confirms that the benchmark programme will remain the issuance focus in the year ahead. We see the green-bond market as a place where we complement our benchmark bonds through establishing smaller issue sizes, he explains. Exploring the possibilities of this growing market also makes good economic sense. For future transactions we will engage with the market before deciding on the best structure. The green bond offered TCV similar investor diversification benefits to those experienced by the previous four domestic issuers of the asset class specifically a substantial real-money component in the green book. According to NAB data, 60 per cent of the TCV deal sold to fund managers and a further 10 per cent to insurance investors while just 27 per cent went to banks. In nongreen Australian semigovernment syndications, half or even more of the paper is typically placed with bank investors. Placement was largely domestic, at 87 per cent of the book. Lofting tells KangaNews the deal s margin basis points over Australian Commonwealth government securities was in line with the issuer s benchmark yield curve. For the development of the market I think it is important for issuers and investors alike that we minimise barriers. If investors or issuers start demanding a premium it will inhibit the market s growth, Lofting comments. To some extent the transaction was targeted at specialist investors but not exclusively so. Lofting reveals: We started off looking to satisfy the needs of SRI-specific mandates, and we were careful to construct an issue that would meet the requirements of these investors. However, the TCV green bond represents the same liability obligation as all our other issues so I see no reason that future such transactions cannot have a healthy level of both SRI investors and those without specific SRI mandates. Although TCV s term-funding requirement is limited it is not immediately constrained in terms of follow-up green transactions. Lofting says the issuer has established a A$2 billion pool of certified green assets and is also willing to engage with the market on issuance tenor other than five-year duration. 4 KANGA AUG/SEP 2016

2 CommBank pushes leading capital position despite ROE hit Commonwealth Bank of Australia (CommBank) used its August 10 annual results announcement to trumpet its leading capital position among the Australian big-four banks. The overall climb to 10.6 per cent common-equity tier-one (CET1) capital has come with a significant cost in return on equity (ROE), though. The bulk of its year-on-year CET1 growth came from a major equity raising in the first half, and in terms of core capital CommBank believes it is now well positioned for Basel III requirements including any further directives that may come from the Basel committee. Speaking at a results presentation, CommBank s Sydney-based chief financial officer, David Craig, commented: The Basel committee has indicated that it thinks capital levels globally are about right, but there may be changes between individual banks and individual countries. In Australia we have some of the toughest regulations with regard to risk weights, so we believe we are very much at the conservative end and therefore unlikely to see the Basel committee imposing any more specifically relating to Australia. The climb to 10.6 per cent CET1 at the end of June this year CommBank had a CET1 position of 9.1 per cent a year previously came on the back of a A$5 billion (US$3.8 billion) equity raising in the first half of its financial year. The bank reported CET1 of 10.2 per cent as at the end of December Capital growth has not come without cost. CommBank also reported a 1.7 per cent fall in its ROE for the full financial year to 16.5 per cent. Ian Narev, CommBank s Sydney-based chief executive, highlighted the bank s higher level of capital as a key driver of the ROE reduction. He believes the offset is worthwhile. We are among the most highly capitalised banks in the world, our levels of deposit funding have gone up, the weightedaverage tenor of our wholesale funding has gone up which is important for AUSTRALIAN BIG-FOUR BANK CET1 POSITIONS BANK CET1 POSITION (PER CENT) REPORTING PERIOD END ANZ Banking Group Mar 16 Commonwealth Bank of Australia liquidity purposes and also the liquiditycoverage ratio remains strong, Narev commented at the results announcement. On all these dimensions capital, liquidity and funding in our minds we are an unquestionably strong institution. Australia s other three major banks report on a different calendar from CommBank. CommBank s incremental second-half CET1 growth allowed it to post an updated figure that remains greater than its peers most recent reporting periods, though in one case only marginally (see table on this page). Deposit focus Another area of focus in CommBank s results is deposit funding. The bank increased the proportion of total funding raised in deposit format by 1 per cent, to 66 per cent, in the year to the end of June. It says its strategy on funding and lending costs is a drive to retain this position in the face of expected competition as Australian banks position themselves for the net stable-funding ratio (NSFR). Narev explained: We are very well positioned [for the NSFR]. Other banks may be in somewhat different positions, so we can expect that as other banks evolve towards the standard they will be very keen to raise deposits. Conservatism is the order of the day across CommBank s funding and liquidity Jun 16 National Australia Bank Mar 16 Westpac Banking Corporation Mar 16 SOURCE: AUSTRALIAN SECURITIES EXCHANGE MAY-AUGUST 2016 book, including a notable increase in the average duration of wholesale funding and a reweighting of the liquid-assets book in favour of regulatory high-quality liquid assets (HQLAs). CommBank s average term-funding duration increased by 0.3 years to 4.1 years, year-on-year. Wholesale term issuance with a residual duration of more than a year makes up just 10 per cent of the bank s aggregate funding mix, however compared with 14 per cent of short-term wholesale funding and a further 3 per cent of long-term issuance with less than a year remaining to maturity. CommBank also quantifies the increase in cost of term funding over its financial year. It reports an indicative threeyear borrowing cost of 98 basis points over bank bills for the year ending June , compared with 72 basis points for the preceding 12-month period. The size of CommBank s liquid-assets book remained relatively stable, year on year, growing by just A$2 billion to A$134 billion. The big change came in the form of the respective volume of HQLAs and securities qualifying for the committedliquidity facility (CLF). At the end of June 2015 CommBank reported that it held A$66 billion apiece of the two types of assets, where a year later it held A$75 billion of HQLAs and just A$59 billion of CLF paper. 5

3 Westpac says its new tier-two angle offers efficiencies for issuer and investors Westpac Banking Corporation (Westpac) s decision to issue the first Basel-III compliant bank tier-two transaction in the Kauri market was driven by a desire for further diversification of tiertwo product, the issuer tells KangaNews. The fact that the transaction was issued out of the Australian head office rather than via Westpac s New Zealand subsidiary provided a point of difference from recent Basel-III compliant tier-two trades in New Zealand as well as an additional layer of comfort and was a key attraction for investors, lead managers add. Following a number of deals from the New Zealand subsidiaries of Australian banks since 2014 (see chart on facing page), Westpac priced NZ$400 million (US$284 million) of 10-year non-call fiveyear subordinated notes on August 4. The deal is Westpac s first new-style tier-two trade in New Zealand and means all four major banks have now issued Basel IIIcompliant notes in New Zealand dollars. major-bank transaction in New Zealand has included another major on its top line, although some previous tier-two deals have featured multi-manager lead groups. Guy Volpicella, executive director and head of structured funding and capital at Westpac in Sydney, says the deal opens a market which the bank had previously left almost untapped. Recent transactions, such as Bank of New Zealand [BNZ] s tier-two deal priced in November 2015, made it clear that there is demand for this type of product in the New Zealand market. We presented a unique opportunity to New Zealand investors that had not previously been offered the chance to participate in a major-bank tiertwo transaction offered by the Australian parent in New Zealand dollars. The fact that Westpac has an issuing subsidiary in New Zealand is largely irrelevant to the status of the Kauri deal. It is no different from us issuing in Singapore or Japan, or in Australian dollar EMTN format, as we have previously done, Volpicella adds. Fair pricing Westpac and its lead managers highlight the robust support the transaction attracted from domestic institutional investors as well the retail investor base. According to lead-manager data, the bonds were targeted at, and placed entirely with, New Zealand investors. By type, 32 per cent went to asset managers and the remainder was sold into the retail market. Volpicella says institutional-investor THE KAURI FORMAT PROVIDES EFFICIENCY FOR INVESTORS, INCLUDING THE FACT THAT THERE WAS ONLY ONE SET OF CREDIT WORK FOR THEM TO CARRY OUT. IT ALSO HELPED THAT INVESTORS WILL SIT SIDE BY SIDE WITH EVERY OTHER GLOBAL INVESTOR THAT OWNS WESTPAC TIER-TWO SECURITIES. GUY VOLPICELLA WESTPAC BANKING CORPORATION Westpac s Kauri priced at 260 basis points over five-year mid-swap, equating to a coupon and yield of per cent until the reset date in The offer was launched for a minimum of NZ$250 million and after the order book grew to approximately NZ$470 million the issuer elected to increase the volume to its final level. The deal was arranged by Westpac Institutional Bank (WIB) and had BNZ, Deutsche Craigs, First NZ Capital, Forsyth Barr and Macquarie Bank as additional lead managers. According to KangaNews data, this is the first time a Allan O Sullivan, executive director and head of frequent borrowers and syndicate at WIB in Sydney, says the head-office format provided an additional layer of comfort for investors. Issuing this way means the transaction is on the same terms as Westpac s outstanding fully compliant Basel-III tier-two issuance, as opposed to an instrument issued out of the subsidiary. From a transparency perspective, investors understood that the notes would all rank equally whether they bought the Kauri deal, Westpac s recent Australian dollar EMTN or indeed an Australian domestic MTN. participation exceeded the bank s initial expectations of per cent, and helps demonstrate the transaction s fair value. The institutional market is acknowledged to have greater precision in terms of how it assesses pricing on transactions, so strong support from this investor base further affirms the relative value, Volpicella argues. We saw participation from some New Zealand institutional investors that have not previously bought tier-two, or have not participated for a number of years. The retail bid was central to this transaction, though, and therefore 6 KANGA AUG/SEP 2016

4 striking the right balance for retail and institutional investors in the sense of offering an acceptable headline coupon and credit spread was paramount. The Westpac deal team points to tier-two precedents with higher headline coupons. BNZ and Insurance Australia Group priced subordinated transactions at more than 5 per cent in November 2015 and March Given we were targeting the retail bid and incremental support from institutions, we had to think quite carefully about being the first issuer to bring a deal with a coupon inside 5 per cent, O Sullivan reveals. Due to movements in underlying interest rates we were looking at a transaction with pricing inside these levels. Ascertaining fair pricing for issuer and investors was therefore one of the key challenges presented. From a relative-value perspective, the lead managers suggest the reoffer spread was flat to the secondary levels of Commonwealth Bank of Australia s A$750 million (US$572.1 million) tier-two deal priced in May this year, and basis points inside BNZ s November and therefore presenting the parent was the optimal strategy. Some institutional investors in this transaction had previously bought Westpac subordinated issuance in Australian dollars, O Sullivan tells KangaNews. These investors were therefore already familiar with the parent s, as opposed to the subsidiary s, balance sheet, and more critically were in a position to better gauge the major-bank Australian dollar tier-two curve, both primary and secondary. This was another major factor in our pre-launch discussions around pricing. The fact that the securities were issued out of the parent provided additional comfort around the structure of tier-two instruments in New Zealand, in particular point of non-viability (PoNV) and conversion, explains Mat Carter, director, debt capital markets and syndicate at WIB in Auckland. Carter tells KangaNews: General feedback was that asset managers liked the fact that only one regulator, namely the Australian Prudential Regulation Authority [APRA], would give final sign-off on MAJOR BANKS NEW-STYLE TIER-TWO ISSUANCE IN NEW ZEALAND VOLUME (NZ$M) 1,200 1, CommBank via ASB ANZ via ANZ NZ SOURCE: KANGA AUGUST NAB via BNZ Westpac (Kauri) YTD including needing only APRA discretion on PoNV. Volpicella says Westpac is unlikely to be a frequent issuer in the Kauri market, but adds that it would like to be a regular one. He also expects to see more tier-two issuance in New Zealand but whether this will be via the New Zealand subsidiary or in Kauri format is too early to judge. Issuers need to look for the next best opportunity to go to market, and the best format to choose at that point ASSET MANAGERS LIKED THE FACT THAT ONLY ONE REGULATOR, NAMELY APRA, WOULD GIVE FINAL SIGN-OFF ON PONV RATHER THAN BOTH APRA AND THE RBNZ WHICH WOULD HAVE BEEN THE CASE HAD THE TRADE BEEN ISSUED FROM THE NEW ZEALAND SUBSIDIARY. MAT CARTER WESTPAC INSTITUTIONAL BANK tier-two transaction. Volpicella also reveals that final pricing of 260 basis points over bank bills the tight end of the new deal s indicative guidance of basis points over swaps is equivalent to around 250 basis points over Australian bank bill swap rate. There is therefore a marginal benefit for us, but this was really secondary to our desire for diversification, Volpicella adds. Straightforward approach According to WIB, given the nuances of any new type of transaction offering the most straightforward approach was key PoNV rather than both APRA and the Reserve Bank of New Zealand which would have been the case had the trade been issued from the New Zealand subsidiary. Volpicella also notes the extent to which the simple approach around regulatory oversight was appreciated by investors. The Kauri format provides efficiency for investors, including the fact that there was only one set of credit work for bondholders to carry out. It also helped that they will sit side by side with every other global investor that owns Westpac tier-two securities, in time, Volpicella tells KangaNews. We are not forced to go to market at any particular moment, so we saw this as an opportunity to lock in investor demand for Westpac product. The tier-two securities were issued under the recently introduced bank hybrid regulations that form part of New Zealand s Financial Markets Conduct Act, meaning that future issuance would be considerably simplified. If we see demand for tier-two instruments again we have a product we will be ready to offer, and it won t take us 6-9 months to execute, Volpicella confirms. 7

5 TFS s US high-yield return attracts a broader bid as conditions rebound The issuer of the latest Australian-origin high-yield bond transaction in the US dollar market highlights a developing Australian bid as a notable element of its return to issuance. TFS Corporation (TFS) says it hopes the complementary local bid may signal the potential for a domestic high-yield option to emerge, but it also notes the ongoing dominance and supportive nature of USbased investors. TFS priced the second Australianorigin US high-yield deal of 2016 on July 21, the first being a US$500 million April transaction from Bluescope Steel. TFS issued US$250 million of August 2023-maturity, senior-secured notes, the bulk of the proceeds of which will be used to pay down US$200 million of existing, 2018 maturity, debt. An Australian Securities Exchange (ASX) announcement reveals that the new transaction will reduce the cost of the company s debt to 8.75 per cent from 11 per cent. Frank Wilson, TFS s Perth-based chief executive officer, tells KangaNews he believes there is a well-supported issuing environment for Australian companies in the traditional US high-yield bond market. In fact, according to Matt Egan, Sydneybased head of syndicated and leveraged finance at TFS s lead manager, J.P. Morgan, the high-yield market has rebounded significantly in Conditions in the high-yield and leveraged-loan markets globally are as good as they ve been for some time, Egan tells KangaNews. The J.P. Morgan High-Yield Index is currently trading at around 7.1 per cent, its tightest level in more than 12 months, and the technical backdrop is very supportive for new issuance. The market has rebounded significantly from the volatility at the start of the year, and investors are engaged, cashed up and hungry for paper. TFS itself believes that being a return issuer helped. The company debuted in the US market in 2011 with a US$150 million transaction, which was subsequently increased to the US$200 million being refinanced by the new deal. Domestic attraction The US investor support TFS attracted was complemented by a new if small in size local bid. TFS s first transaction saw no institutional-investor participation from Australasian accounts. But local investors made up around 10 per cent of the final I THINK THE BUSINESS CASE FOR A DEVELOPED DOMESTIC HIGH-YIELD MARKET IS VERY COMPELLING. IT WOULD BE VERY FERTILE GROUND FOR BOTH CORPORATE AND FINANCIAL- INSTITUTION BORROWERS. FRANK WILSON TFS CORPORATION order book for the return which added National Australia Bank (NAB) as a comanager to handle this demand. Wilson says he was encouraged to see Australian fund managers slowly coming to TFS s sector. As a US dollar funder, the issuer is unlikely to issue bonds denominated in Australian dollars. But Wilson comments: I would certainly like to see the trend [for local demand] continue. I think high-quality Australianorigin companies, like TFS, should feel that they can be supported by local banks and financial institutions, not just by those from overseas. In fact, Andrew Gordon, director, debt markets at NAB in Sydney, says he is optimistic about the development of a genuine domestic issuance option over time. He comments: The US highyield space suited TFS because of the structure of the market and the lack of maintenance covenants. Investor demand was strong and the transaction saw very impressive ticket sizes. However, I think the domestic market should be able to reach a point where it can compete with transactions of US$250 million equivalent. Growth in the domestic bid may be attributable to a sector-specific change in sentiment. Wilson comments: Australian investors did not participate in our first transaction almost entirely due to the collapse of a number of Australian agricultural and forestry companies at that time. During the five years between our deals we have taken the opportunity to demonstrate that both our business model, and our product, is unique and in high demand. Wilson believes further development is still required to fully leverage Australian institutional investor support for the high-yield market. However, while noting the ongoing importance of global capital markets, he is optimistic about the prospects of an emerging Australian high-yield option. Wilson tells KangaNews: I think the business case for a developed domestic high-yield market is very compelling. I believe that, if Australian banks and other Australian-origin entities work together to achieve this, it would be very fertile ground for both corporate and financialinstitution borrowers. 8 KANGA AUG/SEP 2016

6 Sub-triple-A Kauri market takes another step forward with Kexim debut The sub-triple-a Kauri market is showing further signs of development following its second debut deal of 2016, market participants say. But lead managers still do not expect a near-term issuance rush. Following deals from Korea Development Bank (KDB) and a more recent follow up from Export-Import Bank of Korea (Kexim), dealers say there may be an opportunity for increased issuer presence in the sub-triple-a space. On July 14, Kexim printed NZ$350 million (US$249.7 million) of five-year bonds with pricing of 125 basis points over mid-swap. The issuer swiftly followed this transaction with a NZ$50 million tap of the same line on July 19. According to KangaNews data, Kexim is the second issuer without a triple-a rating to tap the Kauri market since 2010, after Korea Development Bank (KDB) priced its debut Kauri bond in April this year. ANZ, BNZ and TD Securities were joint leads on Kexim s BNZ s Auckland-based head of debt capital markets, Mike Faville, suggests that New Zealand dollar investors are becoming increasingly comfortable with sub-triple-a Kauri transactions, adding that this comfort has been evident for some time. It has been a matter of finding the names that best suit the market. But other issuers would certainly be able to achieve a successful outcome like Kexim has, Faville says. Prioritising diversity Yoon provides a range of reasons why a New Zealand debut was an attractive funding option, including all-in funding cost particularly compared with Australia. He comments: In recent times, swap costs have been very competitive for New Zealand dollar funding. In addition, that recent Kauri flow shows that New Zealand is moving in the right direction. KDB and Kexim are two examples that highlight the development we have seen in the New Zealand market, Sorensen comments. Aside from names outside the triple-a band, we saw L-Bank and KfW Bankengruppe come to the market for the first time last year, while Inter-American Development Bank has successfully returned to the market after almost a decade. So overall we are seeing positive issuer development and diversification. Following KDB s debut Kauri in April this year, intermediaries said the development of the sub-triple-a Kauri market would benefit from growth of the local bid. Precise distribution data were not available in the wake of KDB s Kauri NEW ZEALAND S POSITIVE YIELD, LIKE AUSTRALIA S, IS LIKELY TO PROVIDE SIGNIFICANT MOTIVATION TO INVESTORS THAT MIGHT NOT HAVE PARTICIPATED PREVIOUSLY IN NEW ZEALAND DOLLAR DENOMINATED TRADES. THIS COULD LEAD TO ISSUERS BEING MORE INCLINED TO PURSUE KAURI-MARKET OPPORTUNITIES. GLEN SORENSEN ANZ inaugural Kauri and ANZ was the sole lead on the subsequent tap. Hee-sung Yoon, treasurer at Kexim in Seoul, reveals that the issuer first looked at the Kauri market a few months prior to execution and had been monitoring the market for the right window ever since. We were in no rush to issue ahead of the Brexit vote, Yoon reveals. Nevertheless, following the referendum we saw market conditions stabilising relatively quickly and, given Kexim is a well-known name in the regional market, we were confident that executing at the time we did would reap a successful outcome. debuting in the Kauri market provides an opportunity for us to further diversify our funding. It is for these reasons that we chose to issue a Kauri bond although we certainly plan to return to the Kangaroo market in the near future. The Kauri market has experienced a notable issuance rebound in recent years, but until recently its opportunities tended to be concentrated among a relatively narrow group of borrowers. Glen Sorensen, director, syndicate at ANZ in Wellington, acknowledges that the Kangaroo market is a step ahead of New Zealand in terms of diversity, but insists debut transaction, but market sources tell KangaNews that Asian investors dominated the book. Distribution data from Kexim s order book show 58 per cent was sold to Asian investors, with 25 per cent going to Australia and New Zealand, 15 per cent to Europe, the Middle East and Africa, and the balance to the US. Unlike KDB, banks were to the fore for Kexim, at 63 per cent, followed by fund managers at 28 percent, sovereign wealth funds at 6 percent and private banks at 3 per cent. Kexim roadshowed in New Zealand in February and Yoon notes the extent to 9

7 which Kangaroo and Kauri deals require much work in terms of attracting onshore investors. He adds: The difference between our debut in the Kangaroo market compared with the Kauri market is that our Kauri bond is repo-eligible. As a result, we were able to attract a higher number of bank-balance-sheet orders compared with other investor subsets. Growth potential Tom Irving, TD Securities Singaporebased managing director and head of Asia syndicate, sees signs that the New Zealand market is opening up to new issuers. There is always a desire from investors to look at credits that yield a reasonable spread over benchmark. Korean credits are perfect examples of successful New Zealand issuers, but there are other names that could also achieve the same outcome. Irving suggests that a recent rise in sovereign downgrades could drive an increase in Kauri flow outside the triple-a category. To become a developed market we need to see breadth of issuers, he adds. The debuts by KDB and Kexim are positive developments in this context. Faville is also optimistic that the subtriple-a Kauri market will continue to develop but he suggests it is a long-term project. He tells KangaNews: Issuers want the confidence that there is a market for their transactions. But investors want to see successful deals executed in order to be comfortable investing. We have been fortunate that the first two non-triple-a Kauri transactions have been for wellsupported issuers and achieved solid results. Sorensen suggests future development could stem from the fact that much of the developed world s debt is now negativeyielding. New Zealand s positive yield, like Australia s, is likely to provide significant motivation to investors that might not previously have participated in New Zealand dollar denominated trades, he tells KangaNews. This could lead to issuers being more inclined to pursue Kaurimarket opportunities. Return deal just one more step on the Kangaroo path, NRW.BANK says Following its return to Kangaroo issuance after almost a decade out of the market, NRW.BANK says it hopes to build on the small, 10.5-year deal it printed on July 14. Having expended significant energy on the Kangaroo market over the years, the German agency hopes to grow its new line and establish more in time. NRW.BANK printed A$50 million (US$38.1 million) in what was its first Kangaroo trade since August Frank Richter, head of investor relations at NRW. BANK in Düsseldorf, says: This is only the first step. The new line is open and we are confident we will see it grow, but we are also open for other lines if it suits investor demand more. We are working on establishing an entire credit curve in the fullness of time. NRW.BANK s only previous Kangaroo deal was a A$300 million bond that matured in The issuer roadshowed in Australia and Japan in January this year but following up with a transaction required yet more patience, Richter says. It was and to some extent this is ongoing hard work to once again open credit lines for NRW.BANK, he says. This was also the key bottleneck, which explains the time gap between roadshow and issuance. Investors had to analyse our annual report, while Japanese accounts faced their financial-year end and, finally, we had to wait for market conditions to be favourable for both sides. Richter credits NRW.BANK s leads Daiwa Capital Markets and RBC Capital Markets which also organised the issuer s 2016 roadshow. Both were patient and persistent, and helped us discover the perfect issuing window, he comments. The key goal for NRW.BANK in returning to Kangaroo issuance, Richter adds, is being able to access a growing investor base in Australia, Japan and the global central-bank sector. For this reason, the issuer identified the Kangaroo market as strategic well ahead of its return. Bringing a long-dated deal was not a requirement for NRW.BANK, though the long end of the curve has been more fertile ground for smaller Kangaroo issuers of late. However, Richter adds that the issuer appreciates the opportunity to find duration that is otherwise generally only available in the euro market. THIS IS ONLY THE FIRST STEP. THE NEW LINE IS OPEN AND WE ARE CONFIDENT WE WILL SEE IT GROW, BUT WE ARE ALSO OPEN FOR OTHER LINES IF IT SUITS INVESTOR DEMAND MORE. WE ARE WORKING ON ESTABLISHING AN ENTIRE CREDIT CURVE IN THE FULLNESS OF TIME. FRANK RICHTER NRW.BANK 10 KANGA AUG/SEP 2016