By Gareth Vaughan
Unison Networks and Transpower are the latest New Zealand companies to tap cheap, long-term funding from the private placement debt market in the United States.
Unison is raising US$100 million (NZ$122.7 million) in equal 10 and 12 year tranches, the Hawke's Bay Power Consumers' Trust owned company's chief financial officer, Greg Morgan, told interest.co.nz. It's Unison's first foray into the US private placement market. Morgan declined to comment on the interest rates Unison will pay investors.
Meanwhile, national grid operator Transpower is making its second foray into the US private placement market in less than a year after raising US$150 million, or NZ$203.5 million, through a 12 year debt placement to 10 US based institutions last October. That issue is paying investors 3.6%, or 1.1% above 10-year US Treasury bonds.
On the company's new plans, a Transpower spokeswoman would only say a deal is expected to be confirmed around the middle of next month. Transpower has an AA credit rating from Standard & Poor's and an A1 rating from Moody's Investors Service.
Morgan said for Unison, which doesn't have a credit rating, the US private placement market is attractive due to the long-term loans available through it.
"The bank funding here is more short-term. Even in the bond market you might get up to seven years, but for an infrastructure business like ours with long term assets, you're wanting something a bit longer," Morgan said.
US debt investors are in an extended period of near zero official interest rates amid the prospect of the US Federal Reserve launching a third round of Quantitative Easing to devalue US dollars. This is is encouraging them to invest in corporate and government debt in non US dollar currencies with higher interest rates.
Earlier this year SkyCity and Powerco raised a combined NZ$420 million in the US private placement market , following in the footsteps of Auckland International Airport, Vector, Transpower and Mighty River Power who raised a combined US$682 million in the market late last year. More major New Zealand companies are tipped to follow.
"There's quite a few (companies) going to that market at the moment," Morgan said.
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