Australian companies including Tabcorp Holdings Ltd. and Telstra Corp. are taking a lead from their New Zealand neighbors by turning to individual bond investors as banks cut deposit rates. Melbourne-based Tabcorp, Australia’s biggest gaming and entertainment group, is marketing the nation’s first local- currency bonds aimed at individuals since the 1980s after Auckland-based Fonterra Cooperative Group Ltd. and Auckland International Airport Ltd. sold bonds to the New Zealand public this year, according to data compiled by Bloomberg. “It’s possible to get a corporate bond away with a basis point differential that makes it worthwhile and addresses a retail market where people are saying: Where do we put our money?,” John Stanhope, chief financial officer of Telstra, said in a phone interview from New Zealand, adding Australia’s largest phone company is considering a retail debt sale. Australia and New Zealand companies are targeting individuals for funding after the world’s financial companies had $1.3 trillion of writedowns and losses since the start of the credit crisis, eroding assets and curbing investor appetite for all but the safest securities. Tabcorp proposes to pay 7.39 percent on its bonds, or about 2.5 percentage points more than the highest term deposit rate offered by Australia’s four biggest banks, to lure buyers. The official cash rate target has declined 59 percent in the past year after the Reserve Bank of Australia on April 7 cut it to 3 percent, the lowest in 49 years, reducing the rates banks pay savers. Domestic Bonds The volume of Australian corporate bonds sold offshore outstrips domestic market issuance, RBA data show. The 91 domestic Australian dollar corporate bonds outstanding from the nation’s 2,307 private companies compares with 70 domestic local-currency securities outstanding among New Zealand’s 251 firms, Bloomberg data show. The NZXCA Index, a gauge for New Zealand domestic corporate bonds worth at least NZ$50 million ($29 million) and rated at least A-, shows an annual return of 7.3 percent after falling to 5.75 percent Jan. 29, its lowest since 2005. New Zealand’s five- year government bonds pay 4.41 percent, compared with 6.45 percent a year ago, Bloomberg data show. Sales to individuals are “being driven by retail demand for high-yielding assets,” said Frank Jasper, who helps manage NZ$520 million as a senior portfolio manager with Auckland-based Fisher Funds Management. “With bank term deposit rates falling, household names have become very attractive places for capital.” 9% Notes Auckland-based Fletcher Building Ltd., the nation’s biggest construction supplies company, raised NZ$131 million from 9 percent notes sold to individuals in November, according to Bloomberg data. Fonterra, the world’s biggest dairy exporter, in February agreed to pay a coupon of 7.75 percent in a sale of six-year notes. It was able to increase the sale to NZ$800 million from an initial target of NZ$300 million, the data show. Tabcorp said it received orders for A$200 million ($142 million) of bonds within a week from the start of its local- currency offer, the first to be marketed to individuals since Telstra predecessor Telecom Australia sold A$53 million of 13.5 percent notes more than 20 years ago. Three-month term deposit rates at that time were 13.6 percent, according to RBA data. Tabcorp’s five-year bonds offer the third-highest coupon from an Australian company on securities that haven’t yet matured after Resolute Mining Ltd.’s 12 percent notes and Apex Minerals NL’s 11.25 percent notes, according to Bloomberg data. Bank Loans While the 7.39 percent it will pay bondholders is more than the company would pay for a loan, “it would not have been possible to get five-year money from the banks,” spokesman Bruce Tobin said in an e-mailed response to questions from Bloomberg. “Many retirees have pulled back into cash out of shares and property trusts, which used to be a good source of yields in the 6 to 8 percent range,” said Graham Bradley, a director of Sydney-based Stockland, Australia’s biggest housing developer. With banks reluctant to give more than two-year rollovers on debt, “five-year bonds would help companies get a better maturity profile than is currently available.” Bank of New Zealand Ltd., the country’s third largest, on March 27 sold NZ$50 million of five-year securities paying about 6.15 percent. That’s 2 percentage points more than the bank’s own highest term annual deposit rate and better than the 4.775 percent it offered February 19 for government-backed notes. “Bank funding will continue to be a challenge for a period, and with dividends being cut back investors are looking for a reasonable yield,” said Ian Blackburne, chairman of CSR Ltd., Australia’s second-largest maker of building products.

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