Christchurch City Council in NZ$40 mln debt raising at 18 basis points higher than recent Dunedin raising

The Christchurch City Council has issued NZ$40 million floating rate notes at a margin 18 basis points higher than a NZ$90 million issue by the Dunedin City Treasury last week that carried a lower credit rating, although the Christchurch issue is two years longer.

In an offer led by Westpac Institutional Bank, the Christchurch City seven-year floating rate notes were priced at 125 basis points over three month bank bills.

Christchurch City, hit by a devastating earthquake on February 22, has an AA+ long-term credit rating with a negative outlook from Standard & Poor's.

The Dunedin City Treasury last week refinanced NZ$90 million worth of debt the Dunedin City Council took on to fund the new Forsyth Barr Stadium, selling five year floating rate notes at 107 basis points over three month bank bills.

Dunedin has an AA credit rating from Standard & Poor's.

The Dunedin offer was managed by ANZ.

The Christchurch notes will be issued on April 29 and mature on April 30, 2018. They are senior debt instruments secured by a charge over rates. Interest will be paid four times a year with the first payment due on July 30.

The notes were sold in minimum subscriptions of NZ$500,000 with multiples of NZ$100,000 thereafter.

Institutional investors typically hold floating rate notes as a an alternative to short-term securities or cash, usually in the expectation that short term rates will rise over the life of the issue.