The ASX listed blue chips each have about $10 billion of long-term debt but are keen to tap everyday investors seeking to diversify away from equities.
Wesfarmers and Telstra want to sell corporate bonds directly to retail investors, if the red tape around such deals could be cut, aiming to attract new sources of capital as yields surge to their highest levels in over a decade.
But perceived tax and regulatory impediments mean few bond issues are made available to regular investors, in what has beenMeanwhile, volatile global markets have added to the cost of raising money overseas for Australian companies via both borrowing and currency hedging costs. Tapping the domestic retail market could prove less costly for companies as they handle rising inflation.
However, less than 1 per cent of that market was controlled by personal investors, according to testimony to the review from the Inspector-General of Taxation. By contrast, personal investors in the US were said to control 20 per cent of the nation’s corporate bond market. The issuance of corporate bonds in Australia was found to be much lower than in the US, Europe or New Zealand.
“For us, it would be great to give retail investors a little more choice, but for the big corporates to do that we need to reduce the complex hoops to be able to issue.”Telstra was one of the largest corporate issuers of retail bonds during government ownership as Telecom Australia. “However, given the recent interest rate increases and market volatility, we think over the next 12 to 24 months it should be an attractive product for retail investors.”Under the proposed changes, an issuer such as Wesfarmers would make its bond documents and disclosures available to the public and produce additional information specifically for individual investors to list corporate bonds on an exchange.
“This is a moment whereby we should be thinking about how we make corporate bond opportunities more broadly available to investors,” she said.Large Australian companies tend to access several major bond markets depending on the relative cost and seek to maintain a presence in important markets.
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