by Gareth Vaughan
Westpac New Zealand Treasurer Jim Reardon says he's "over the moon" after the bank raised $800 million in a bond issue priced at the tightest five year spread for a bank bond in New Zealand since the global financial crisis.
Westpac launched the offer last Friday saying it was looking to borrow a minimum of $100 million and a maximum of $500 million through a five year offer of senior, unsecured and unsubordinated bonds.
The bonds were to be priced at a margin of between 1% and 1.05% over the swap rate.
The bonds were priced this morning at 103 basis points over the swap rate, giving a coupon of 5.545%.
"It's a great price from our point of view," Reardon said. "That's the tightest five year bank pricing in New Zealand since the global financial crisis. So we're over the moon. We set the range where we thought was realistic. We've priced it in the middle of the range (and) feedback from the market was that was fair and reasonable."
He said demand had been very strong with total interest in the issue topping $820 million meaning there had been some light scaling. Reardon said about one-third of the bonds were going to individuals and two thirds to institutional investors.
One of the biggest
Westpac describes the issue as the largest ever domestic single tranche, senior unsecured, bond issue by a New Zealand bank. And it's one of the biggest domestic bond issues full stop. Rabobank borrowed $900 million via a subordinated, perpetual, resettable bond issue in 2007. ANZ borrowed $835 million via a perpetual callable subordinated bond issue in 2008, which it re-set for a further five years in April. And Fonterra raised $800 million through a six year bond issue in early 2009.
Reardon said the $800 million issue demonstrated the growth being seen in the New Zealand domestic market.
"If you look at the amount that's going into the private wealth sector and the volume that's going into KiwiSaver accounts now, it's really building some size into what New Zealand bond issuers can expect to see if they price a deal right and if they're a good quality issuer," said Reardon.
"This is a sign of where we'll see good deals sizing up to now."
Westpac's initial $500 million limit had been set following July's ASB five year bond issue that raised $525 million.
In terms of what the bond issue meant for Westpac's funding position, Reardon said he'd be "a little surprised" if the bank goes back to the markets to raise more money before Christmas.
"We saw this as pre-funding of our 2014 needs anyway. So unless there was a seismic move in the New Zealand credit markets we wouldn't be expecting to have to do anything else this calendar year," said Reardon. "It gets us into 2014 with a head start."
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"It's a great price from our point of view," Reardon said. "That's the tightest five year bank pricing in New Zealand since the global financial crisis. So we're over the moon. We set the range where we thought was realistic. We've priced it in the middle of the range (and) feedback from the market was that was fair and reasonable."
And nicely prepositioned to bail out the bank in the event of insolvency under OBR - are the end investors aware of the status of their savings? Can we call into question the veracity of fund manager due diligence given the tight spread.
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Notably, when it comes to flogging the public's assets the National led government errs on the side of extreme caution.
Cautious institutional investors have Meridian Energy's owner - the New Zealand government - willing to give up a 12 per cent to 13 per cent indicative yield in an effort to get the $2 billion float off the ground. Read more
Crony capitalist contempt for ordinary New Zealanders never ceases to amaze me.
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