Capital Markets: Lending on the increase again

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Bankers shelved creative lending after the Global Financial Crisis putting a renewed reliance on corporates' traditional cashflows.

That's according to Rod Smith, Westpac's head of debt capital markets and Mark Steed, the bank's head of agribusiness and property finance.

The pair say corporate lending is picking up after a relatively subdued couple of years.

"They're taking what you might call safe bets rather than more aggressive risks and are much more sure of what they are going into," says Steed.

"The banks have plenty of powder in the gun, but everyone's just playing a waiting game," adds Smith.

"We haven't seen for a while what we used to term the hunting licences - going out and giving people $1 billion and saying 'Go buy something'."

Westpac figures show domestic debt issuance was relatively subdued in 2013. But a rush of issuers came to the domestic market in the last three months to take advantage of low credit spreads and strong demands for investors. Among the companies that have recently come to market: Transpower, Wellington International Airport, HSBC, Goodman Property Trust, Toyota Finance, Christchurch International Airport and Westpac New Zealand.

Total issuance on New Zealand's bond markets in 2013 was $11.015 billion ($1.089 billion - corporate; $3.68 billion - domestic financial institutions; $$2.071 billion - local government; $4.175 Kauri)

. In the year to date (2104) already there is $3.536 billion total issuance - marginally below the $3.72 billion recorded for the same period in 2013.

Smith and Steed say the corporate players tend to be taking "safe bets." They are investing in sectors they know about - such as health, education and the primary sector. But activity is stepping up.

Steed says on the property side there is a vastly different landscape dominated by Christchurch and Auckland.

Among the interesting developments:

• Iwi - particularly Tainui and Ngai Tahu - are combining forces to coinvest using the proceeds of their Treaty of Waitangi settlements, and have bolstered up their in-house commercial capabilities.

• The NZ Super Fund under Adrian Orr's leadership is creating an NZ Direct Fund to invest in long-term assets.

• Irrigation projects on the Canterbury Plains where farmers will be equity participants but the structure also includes infrastruture and funding plays.

• Private participation in Housing NZ's funding; expected to get more legs after the election.

Another trend is the growing tendency by some offshore investors - including some Asian players - to invest in New Zealand to shore up distribution lines in the agri-sector rather than buying assets outright and having to go through the tradition process of gaining Overseas Investment Office approval.

This can take the form of minority holdings.

Steed emphasises it's not just an Asian story - other overseas buyers are coming from the US and Europe.

The bank is planning to take more roadshows into Asia where industry specialists, be they agricultural or infrastructure bankers, will build investor relationships.

Face time is important.