The first debt auction from the new local authority bond bank, the Local Government Funding Agency (LGFA), has attracted NZ$1.32 billion worth of bids for the NZ$300 million worth of debt sold.
The results from the LGFA's first bond tender, released this afternoon, show a total of 105 bids for the two bonds on offer worth 4.4 times the debt being sold.
A total of 22 bids were submitted worth NZ$216 million for the NZ$50 million worth of bonds offered that are due to mature on April 15, 2015. There were five successful bids for the NZ$50 million with a weighted average successful yield of 3.67%.
A total of NZ$1.104 billion through 83 bids was submitted for the bond due to mature on December 15, 2017 with 26 bids succeeding for the NZ$250 million worth of the bond on offer, with a weighted average successful yield of 4.61%.
The auction was open to both domestic and overseas institutional investors.
In a report on the inaugural LGFA debt auction ANZ said broadly speaking, it had done well to issue bonds with spreads above comparable government debt of around 80 and 118 basis points for the 2015 and 2017 bonds, respectively.
"At these margins, the LGFA has not come close to achieving its stated aim of an average cost of funds of 50 basis points above New Zealand government bonds. However, given current market conditions, we consider today’s tender to have been a success," ANZ said.
"Although success on the part of the issuer may perhaps imply the opposite for investors, there is a happy middle ground, and we think today’s margins are consistent with that. The fact that bid cover was as high as it was is very encouraging, as it shows the issuer is on peoples’ radars."
(Update adds comments from ANZ).
5 Comments
Roger - It will be interesting to see how many of these institutional investors will be looking to the NZ Gov't for a bailout on this debt in the future. As all NZ'ers know nearly all LA spending is non-productive. I suppose the builders of sports stadia will be encouraged by this outcome.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10729158
The Auckland council has a $300m hole it its budget from the IT systems blow out…
“Making matters worse for ratepayers, the council has only budgeted $150 million for the $450 million cost over the next eight years. This has left a $300 million shortfall that will have to be borrowed or paid for from rates at a time of economic hardship”
Anyone know if this is related?
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