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UPDATE 1-Barclays sells A$1.5 bln notes to 100 investors

Published: 05 Aug 2009 00:43:28 PST

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SYDNEY, Aug 5 - The Australian unit of British bank Barclays Plc <BARC.L> has priced A$1.5 billion ($1.3 billion) of three-year bonds at 165 basis points over swap and BBSW, a joint lead said on Wednesday.

The offer, which is not backed by any government guarantee, consists of A$500 million in fixed and A$1 billion in floating rate notes.

The offer received more than 100 orders across both tranches, with 75 percent placed in Australia and the balance offshore, a joint lead said.

The order book exceeded A$2 billion worth of bids from banks and fund managers, and accounts were scaled back.

Such demand allowed Barclays to slightly reduce the margin to 165 bps from 170 bps initially.

Australian bond issuance has been dominated by government-guaranteed bonds since the sovereign pledge was introduced late last year to help banks weather the crisis.

However, the amount of bonds issued without the guarantee is slowly increasing as global sentiment improves.

In July alone, A$13 billion of bonds, guaranteed and non-guaranteed were sold, making it the highest monthly volume in more than two years, according to Deutsche Bank data.

A fund manager estimated he received a suitable premium of around 30 bps over similar Barclays bonds denominated in euros.

Other investors also compared the margin with similar unguaranteed bond issues sold in June by two European banks at widely different margins.

French bank BNP Paribas <BNPP.PA>, rated one notch higher than Barclays at AA by S&P, sold A$1 billion of three year notes at 145 bps over BBSW. The notes tightened significantly in the secondary markets to around 105 bps.

Britain's Royal Bank of Scotland <RBS.L> (RBS), rated one notch lower than Barclays at A-plus, raised A$1 billion of three year notes at 275 bps over BBSW. The issue is currently quoted at an estimated 250 bps, according to a trader in Australia.

"Barclays had to pay a lot more than BNP Paribas because Barclays is a UK bank and the country is not in great shape," the fund manager said.

Earlier in the week Barclays reported a 39 percent surge in bad debt as recession took its toll on borrowers.

Royal Bank of Scotland, which is expected to post its results on Friday, was bailed out by the British government which took a 70 percent stake after huge losses on credit-backed assets.

Deal details are as follows:

Issuer: Barclays Bank plc Australia branch

Facility: Domestic fixed and floating rate notes

Law: Australian

Amount issued: A$1.5 billion

Maturity: Aug 13 2012

Set date: Aug 13

Lead(s): ANZ, Barclays Capital, CBA, NAB, Westpac

Issuer ratings: AA- (S&P), Aa3 (Moody's)

Tranche: Fixed FRN

Amount: A$500 mln A$1 bln

Coupon: 6.75% +165bp/3mBBSW