Macquarie caught on funds

Macquarie Group is expected to return to credit markets before the expiry next month of the government funding guarantee, in an attempt to roll over more than $2 billion worth of funds that are due to expire this year.

Credit market analysts yesterday said the withdrawal of the term debt guarantee was a setback for Macquarie Bank and some regional banks that also faced a looming rollover of funds this year.

However, Deutsche Bank's Gus Medeiros said that for most banks, the debt refinancing requirements were ''manageable''.

Macquarie has $1.7 billion of debt maturities this year, including $1.3 billion by March.

Macquarie last year raised about $15.5 billion in funds using the government guarantee, marking it as one of the biggest users of the facility in relation to its funded asset book.

Indeed, it came under criticism last year after it set up a crack lending unit that raised billions of dollars worth of government guaranteed funds and on-lent the funds to corporations around the world at a substantially higher rate.

Still, Treasurer Wayne Swan said the Reserve Bank had not informed him of any improper use of the guarantee. Macquarie chief executive Nicholas Moore this morning fronts analysts for the investment bank's annual briefing on operations.

Ratings agency Moody's said yesterday the removal of the guarantee scheme would not have any immediate effect on Australian banks' credit ratings.

However, Patrick Winsbury, a senior vice-president with Moody's Australia, said there remained the longer-term issue of the Australian banking sector's ''significant reliance'' on offshore wholesale funding, particularly given extensive looming regulatory changes.

Australian banks have come through the global financial crisis well compared with many peers in developed markets.

Mr Swan yesterday told Parliament that the guarantee, scheduled to expire on March 31, had been critical in supporting the flow of credit in Australia.

''It allowed our banks last year to issue bonds in larger amounts, with longer maturities and at lower cost, than had been possible since mid-2007,'' Mr Swan said.

While some expressed surprise that a timetable for the removal of the guarantee coincided with renewed concerns over sovereign risk, analysts said investors were starting to distinguish between countries with serious concerns and those such as Australia with low levels of debt.