Helping smaller property players enter the bond market

Helping smaller property players enter the bond marketOnce the sole domain of large corporates and institutional investors, fixed income specialist FIIG Securities has brought a succession of smaller companies to the bond market. While Australia has a large over-the-counter bond market – with more than $1 trillion currently under issuance by large corporates and institutional investors – smaller, unrated companies rarely get a look-in.In 2012, FIIG Securities changed this by opening up the AUD bond market to unrated corporate groups. FIIG has developed a senior unrated bond offering similar in structure to those issued by larger rated corporates. James Vance, FIIG Securities’ director of Debt Capital Markets, said this is a relatively new market in Australia. “Traditionally, the corporate bond market has only been open to a select few – those billion dollar plus companies looking for large licks of capital and able to attract an investment-grade rating from the agencies.”What we are doing is opening the bond market to smaller companies, including property groups – those $100 million-plus entities that may otherwise not get a rating. We’re accessing a different part of the market and have raised $1.1 billion in predominantly unrated bonds across more than 20 companies,” he explained.One of those companies is ASX-listed Sunland Group Limited, a diversified residential property developer delivering medium-density housing and land subdivisions, together with multi-storey medium and high-rise projects.With a development pipeline of more than 6000 dwellings valued at $3.7 billion, Sunland needed additional long-term capital. By issuing an unsecured bond into the capital markets Sunland was able to reduce the refinance risk associated with its existing banking lines, while gaining access to a new source of capital through the FIIG distribution network.Sunland Group managing director, Sahba Abedian, says the proceeds of the offer will be used to fund future residential developments, property inventories and working capital of the group.Vance says the appeal of capital markets is manifold: diversification of funding, long-term and flexible financing structures with fewer restrictions than those typically associated with bank loans. Depending on the company’s credit profile and industry, FIIG can offer bond terms ranging from five to 10 years.”When companies find out about our offering, they go ‘wow’, because it presents a unique opportunity beyond the banks – one that provides long-term funding, flexibility of terms, less stringent covenant testing and greater access to funding,” Vance said.To find out more, visit the FIIG Securities’ website or contact James Vance.