12: Raising Long-Term Financing
Frank Popoff, Chairman of
the Board (retired), Dow
Chemical
‘A Samurai bond is just
an exercise in matching
exposure and income.’
See the entire interview on
the CourseMate website.
COURSEMATE
SMART VIDEO
Australian company could be classed as Eurobonds, as could non-Australian dollar-denominated
bonds issued in Australia by a non-Australian company. For example, in May 2012, BHP issued a
two-part Eurobond note program, which comprised €1.25 billion in 2.125% coupon bonds due 2018,
and €750 million in 3% coupon bonds due 2024.
7 A foreign bond is an issue that is sold by a non-resident corporation in a foreign country and is
denominated in the host country’s currency. An example is a Swiss franc-denominated bond sold in
Switzerland by a Japanese corporate issuer. In most years Yankee bonds, dollar-denominated bonds
issued by foreign firms in the US market, are the single largest category of foreign bonds. The
Australian equivalent to these bonds are often referred to as Kangaroo bonds – these are issued in
the Australian market by non-Australian companies, are denominated in Australian dollars and are
subject to Australian laws and regulations.
8 International ordinary equity, issues that are sold in more than one country by non-resident corporations,
typically represents between 5 and 10% of all worldwide offerings.
In Australia, equity capital raisings are conducted by the equity capital market (ECM). Activity in
this market can by quite volatile, as can be seen from Figure 12.3, which shows the volume and
value of transactions undertaken by the market every year over the 10 years to 2012. It is interesting
to note that, although the value of proceeds raised appears to have tailed off since the bumper year
when the maximum was raised in 2009, the number of transactions has still remained high. This
would suggest that average transaction sizes have fallen, although since the data has been measured
in US dollars, it probably also reflects the appreciation of the Australian dollar against the US dollar
during that period.
foreign bond
A bond issued in a host
country’s financial market, in
the host country’s currency, by
a non-resident corporation
Yankee bonds
Bonds sold by foreign
corporations to US investors
Kangaroo bonds
Bonds sold by foreign
corporations to Australian
investors, issued in
the Australian market,
denominated in Australian
dollars and subject to
Australian laws and
regulations
international ordinary
equity
Equity issues sold in more
than one country by non-
resident corporations
FIGURE 12.3 A DECADE OF AUSTRALIAN EQUITY CAPITAL MARKET (ECM) ACTIVITY
Australian equity capital markets
Proceeds $USbn
70 900
800
700
600
500
400
300
200
100
0
60
50
40
30
20
10
0
9.1 19.6 20.7 20.9 38.0 44.7 40.0 58.8 29.0 24.3 19.8
2002
172
213 250
284
696
783
386
595
486
(^553539)
Proceeds in $USbn (LHS)
Number of ECM issues (RHS)
Number of ECM issues
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Same period volume comparison (Jan – Sep)
Source: Thomson Reuters
Source: Michael Bennet, ‘IPOs Expected to Come Back if Recovery in Shares Continues’, The Australian, 31 December 2012, Newspix/News Limited.
Source: Cengage Learning