Even before deciding, pitching ideas before the Fed decision is risky. But Macquarie’s action is completely shocking. Before the FOMC announced the policy decision, the company issued a premium to get a high $2.75bn multi-tranche deal. This is the payment scheme; the company priced $650m of 6.25 year non-call 5.25 fixed rate notes at Treasuries. A3/BBB+/A- are the notes ratings. In addition, they have 11.25 year non-call 10.25 tranche at 230bp. Previously, they dropped 6.25-year non-call in a 5.25 floating-rate tranche.
The company expects notes ratings of A2/A+/A. Therefore, to meet this scheme they set $1bn of three-year-fixed-rate notes at Treasury, plus 120bp and $500m three-year FRN at SOFR plus 131bp, recorded IFR Asia. One of the bankers said that this kind of investment-grade is similar to what U.S. issuers are commonly paying. On the deal they find a new issue concession of 25bp paid on the three-year tranche. In addition, for the longer-dated tranches they issued 30bp.
When New York demand was lower than the other notes, the value dropped. In this case, issuers tend to pay attention to building the sizes of the other tranches. The baker said the data distribution is yet in public but the 6.25-year non-call 5.25 FRN dropped facing the low New York demand. The banker later argued that the market currently is very challenging so it is risky to take decisions before the FOMC.
Actually there are four issuers ready to enter investment-grade, but the lone issuer is Australian bank Macquarie Group. It is risky. It is because the borrowers stood down before the Federal Reserve meeting, said one of the market participants. So, Macquarie attempted to use this opportunity to rise above $2.5bn. They wanted to achieve as much funding as possible. Borrowing costs might rise further, thus they take this decision.
