Kiwibank is borrowing $400 million through a five-year retail bond issue that will pay investors interest of 2.155% a year.
The bank's unsecured, unsubordinated fixed rate medium term note offer has been priced at 1.07% over swap rate, after an indicative price range of 1.05% to 1.10% was announced earlier this week. Interest will be paid twice a year in arrears. Kiwibank's five-year term deposit rates range from 2% to 2.70%.
Kiwibank had sought to raise a minimum of $100 million, and says money raised will be used for general corporate purposes, including lending.
The Kiwibank bond issue follows two even bigger recent ones from rival banks. On August 14, a week after the Reserve Bank cut the Official Cash Rate (OCR) to just 1%, ASB said it was borrowing $600 million through a five-year bond issue that will pay investors an interest rate of just 1.83% a year. And prior to the OCR cut, Westpac NZ borrowed $900 million through a five-year bond issue that will pay investors 2.22% per annum. That Westpac offer is the equal biggest non-government New Zealand debt issue.
The Kiwibank bonds will be issued next Friday, September 20, and are set to mature five years later on 20 September 2024. The bonds are expected to have an A1 credit rating from Moody’s, and AA from Fitch. These credit ratings are in line with Kiwibank's own ratings.
The Kiwibank bonds will not be listed on the NZX debt market.
5 Comments
With the backing of its shareholders, 2.155% over 5 years seems high to me.
My money is currently with Kiwibank, for the reason that it has stronger shareholders than these dodgy Australian domiciled predominantly American owned banks.
On ASB's rate, this indicates Kiwibank are paying a premium of $1.32 million per annum. Suggests their CE needs some better negotiation skills, or new money market dealer. I know one who is looking for a new job; aren't you John!
"The Kiwibank bonds will not be listed on the NZX debt market."
Maybe that has something to do with the pricing? If push comes to shove other issues can always find another buyer for your investment via the NZX. (eg. Bond prices rise and you want to cash-out) This issue? Perhaps you're stuck with it for the whole run.
Bonds are only as strong as the issuer, and rank below depositors.
I'm keeping my money available for distressed assets, as the reality of over borrowing, aid and abated by Jonkey margin trading on Chinese speculators, starts to bite.
Fair weather sailor he was, and wouldn't you know he turns up on Treasure Island. I've got news for him. Banks stopped using the gold standard some time back, so all he'll find now is off balance sheet liabilities and a hornets nest.
Only one way rates can go and that's down. But I'm not a economist. If you look for a return on your hard earned savings than you going to be happy with this rate because next year you only can dream of it. So sad this vandalism of people's hard earned savings and pensions.
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