ANZ NZ seven-year, NZ$250 mln bond offer looks good value for the bank

By Gareth Vaughan

Whilst much is being heard from bank bosses about their cost of funding rising, not all sources of money are heading north.

ANZ New Zealand is understood to be receiving strong demand for a seven-year unsecured, unsubordinated bond issue through which it's seeking to raise up to NZ$250 million. Interest.co.nz has heard due to strong demand from investors the bank is restricting take up of the bond to its internal channels and networks such as ANZ Private Bank and Direct Broking with wannabe investors facing the possibility of having their orders scaled back.

The bond, for which investors must stump up a minimum NZ$10,000 investment, will pay an interest rate that will be the higher of a minimum of 6.25%, or the aggregate of the seven-year swap rate plus an issue margin of 2.10% as of the March 9 rate set date. The seven-year swap rate is currently about 4.22% which would see a rate of about 6.32% per annum.

Given the bond offer, which opened on Monday and is due to close at midday on Friday March 9, comes with ANZ planning to call a separate NZ$250 million five-year subordinated bond not set to mature until March 2, 2017 today, which is paying 7.6%, the new longer duration issue looks good value for the bank. The rate on the bond being called was due to be reset on March 15 this year.

ANZ's seven-year bond offer comes after one of the same duration from rival BNZ in December, that's paying lenders' 6.10% and raised NZ$200 million. The BNZ offer targeted an interest rate at the higher of 6.10% or swap rate plus 200 basis points.

See ANZ's bond issuer page here.

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