Amid record low global interest rates there was a surge in the number of Australian companies tapping the European debt markets for funding in 2014, a trend top investment bankers tip to continue in 2015.
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"The increase in euro bond issues was a striking feature of 2014 and that looks like a pretty strong trend heading into 2015," Citi head of debt capital markets Alex Hayes-Griffin said.
The amount of money raised bv Australian issuers in the local market lifted for the sixth year in a row to a record high of $US138.2 billion ($170 billion) in 2014, surpassing the previous record of $US136.3 billion raised in 2013, according to anew report from Dealogic.
There was a big dip in the amount of debt raised by Australian issuers in foreign markets, down 16 per cent year on year to $US126.3 billion, the lowest volume since 2011.
But while foreign issues were down as fewer Australian companies raised money in the United States in 2014, more local finance and treasury teams took the opportunity to tap European debt markets.
Some of the Australian companies that issued euro bonds in 2014 were Sydney Airport, Melbourne Airport, Transurban Group and Brambles.
UBS head of debt capital markets Fergus Blackstock predicts more local companies will turn to European debt markets in 2015, but expects the split of Australian companies issuing debt in Europe versus the US to be more balanced, stressing that there are always company and deal specific considerations as to what market offers the best opportunities.
Mr Blackstock said European politics could have a big impact on debt markets in the year ahead.
"If 2014 was the year of the central banker then 2015 is set to be the year of the politician. Greece, Portugal and the UK all have elections and European politics will ultimately influence whether the ECB goes down the path of full quantitative easing, as the market expects".
Another debt capital markets trend bankers predict will continue in the year ahead is a pick-up in debt issues related to corporate deal-making.
The most important event in Australian corporate credit markets in 2014 was the restructure of the Lowy family's Westfield Group, which resulted in more than $US10 billion worth of debt issues.
"While there is no such mega-deal on the horizon for 2015, an increase in merger-and-acquisition deals will lead to more companies going to the debt markets to raise bridging finance," Mr Hayes-Griffin said.
In a sign the Australian bond market is maturing, bankers noted that the average duration, or "tenor", of debt being issued is increasing.
The big four retail banks, led by Westpac Banking Corporation, topped the Dealogic league tables for Australian-dollar-denominated debt capital market issues in 2014 as the banks' needs to raise money for their own balance sheets swelled their books.
Westpac, Commonwealth Bank of Australia,National Australia Bank and ANZ Banking Group each handled around 10 per cent of the total market share of Australian debt deals in 2014.
After the big four, Citi handled the biggest volume of Australian debt capital market issues in 2104, ranking fifth overall, having helped raise $US13.4 billion across 52 deals giving them a market share of 7.6 percent.
The total volume of debt issues from Australian issuers decreased slightly for the second consecutive year to $US177 billion in 2014, down 4 per cent from the $US185.3 billion issued in 2013. This includes syndicated corporate, financial institution and government bond issues.
There were 418 Australian debt deals issued in 2014, down from 476 deals in 2013.
It was a bumper year for syndicated Australian government bond issues, as Federal Treasurer Joe Hockey struggles to balance the budget as the value of Australia's iron ore, coal and oil exports tumble. The volume of new "Kangaroo" bond issues jumped 34 per cent in 2014 to $US35.4 billion – the biggest year on record.
If the Australian dollar continues its recent declines it could make it easier for the government to raise debt.
Rod Everitt, who heads up the team managing Australian-dollar-denominated debt issues at Deutsche Bank, said that a lower Australian dollar is unlikely to have much impact on what markets local companies decide to raise debt in, but a weaker currency might make Aussie dollar issues more attractive to foreign investors.
