Australia going strong
country pro file
Aussie Dollar MTN Program
In October 1994, almost five years ago, Rabobank Australia initiated a far-
reaching strategie thrust with its decision to buy Primary Industry Bank of
Australia (PIBA). After the successful bid, it found itself with an organization
that was totally focused on providing long-term finance to farm clients
'downunder' - an organization that has since proved itself an exceptional
investment with a high quality book of assets.
Expanding services
8 What'sNewS
Issue 6* June 1999
At the time of the acquisition, however,
PIBA was vulnerable. Apart trom an
innovative residential lending business, it
was essentiallv a one-product shop. 'After
the acquisition, we set about diversifying
PIBA's base and positioning the Rabobank
Australia Group (RAG) as a whole,
including PIBA, as the premier food
agribusiness (F&A) player in Australasian
finance,' says Cor Broekhuyse, the group's
CEO. 'At PIBA, we set about doing that
by trying to leverage the pre-existing
distribution channels, britiging in a
number of different product lines, and
becoming a full-service agribusiness bank.
For instance, we established a specialized
equipment finance company. We developed
an insurance product for the farmers in
consultation with the Interpolis group.
And we're in the early stages of developing
transactional banking products including
phone-in and, eventually, Internet banking,
both of which lend themselves perfectly to
a physically dispersed customer base.'
Beyond the acquisition and development
of PIBA, described on the following page,
RAG also launched a concerted effort in
1995 to plug a gap in corporate banking
and corporate finance by developing a
corporate cliënt base and a full range of
products and services designed to meet its
needs. Starting with corporate finance, it
branched out into structured finance,
mergers and acquisitions, and financial
Cor Broekhuyse leads Australian efforts
markets. RAG also led the RI network in
developing commodity trading and
hedging activities as well. 'Now we can
see the benefits,' Broekhuyse says. 'We're
generally recognized as the best food
agribusiness bank in Australia, not least
in the corporate sector where we now
have an outstanding name.' After
Australia's recent government elections,
for example, RAG received a mandate
from the incoming minister of agriculture
Rabobank Australia gained an
important new source of financing
last month when it became one of the
first foreign borrowers to tap the capital
market downunder with its launch of an
AUD 5 billion medium-term note (MTN)
program. The project was an excellent
example of successful networking and
involved Haijo Dijkstra (Utrecht) and
Andrew Quoyle, David Chinnery, and
Gor Broekhuyse (Sydney). The inaugural
AUD 350 million tranche of 5.25 percent
debt, due in December 2004 and rated
triple-A by Standard Poor's, was
priced at 33 basis points over the com-
parable Australian government bond.
'This was an important event,' says Haijo
Dijkstra, global liability manager. 'Until
now, RAG has been funding itself with
relatively expensive short-term CDs.
Now we can replace these with longer-
dated funds at better rates. Over the 3-5
year life of this program, Australia will
also represent an important new source
of funding for the bank as a whole, since
it allows debt to be issued in the name of
Rabobank Australia Group, Rabobank
Nederland, and PIBA.'
The Aussie Dollar program is a landmark
in our quest for new funding sources
around the world. Australia's is a cash
rich economy that escaped the worst of
the Asian contagion and other financial
market turbulence, and increased its
exports to Europe and North America to
compensate for lost markets elsewhere.
Indeed, recently, the Australian corporate
bond market chalked up a record AUD
3.6 billion in new issues; the first quarter
figure was AUD 5.3 billion. 'The
economy is strong, people are bullish,
and they want to invest,' Dijkstra says.
'Pension funds are also becoming more
active players. And as the government
reduces its sovereign debt, there is a
shortage of high-quality paper on the
market. We were among the first foreign
players to take advantage of the resulting
opportunities.' Other recent issuers
include the Asia Development Bank and
the German bank Kreditanstalt fur
Wiederaufbau.
The MTN issue was lead managed by the
Commonwealth Bank of Australia
(CBA), which beat out other candidates
by its superior nationwide distribution
capability, and its historica! advantage -
the institution's paper enjoys a residual
government guarantee. Although the
guarantee will eventually expire, its
existence enabled us to pursue the tactic
of issuing debt within a few basis points
of publicly-guaranteed debt in Australia,
thus establishing ourselves and creating a
platform on which to develop our yield
curve. Co-managers, who apart from
ourselves included Deutsche Capital
Markets Australia Ltd., Solomon Smith
Barney Capital Markets Australia Pty
Ltd., Warburg Dillon Read, and Westpac
Banking Corp, all rapidly cleared their
allocations. A CBA spokes-person said
the bank was 'delighted with the trans
action and that Rabobank has established
itself in the market at a fair value'.
