As tipped by interest.co.nz earlier this month, national grid operator Transpower has become the latest New Zealand company to tap the United States private placement debt market, raising US$380 million (NZ$466 million) overnight.
Transpower says it has made the placement of senior unsecured notes to 15 US-based institutions comprising the likes of life insurers and pension funds. The money raised is in three tranches with US$232 million having a 10-year maturity, US$78 million a 12-year maturity, and US$70 million a 15-year maturity. They carry coupons, respectively, of 3.43% (1.50% above US 10 year Treasury bonds), 3.58% (1.65% above US 12 year Treasury bonds), and 3.83% (1.90% above US 15 year Treasury bonds).
The deal, arranged by ANZ and JP Morgan, is due to settle on October 14 and Transpower says all proceeds have been swapped back into New Zealand dollars. Transpower says it'll use a substantial chunk of the money raised in the US to fund capital works it has underway.
It's Transpower's second foray into the US private placement market in less than a year after it raised US$150 million, or NZ$203.5 million, through a 12 year placement to 10 US-based institutions last October. That issue is paying investors 3.6%, which was priced 1.1% above 10-year US Treasury bonds.
US debt investors are in an extended period of near zero official interest rates as the US economy continues to struggle amid speculation the US Federal Reserve will launch a third round of Quantitative Easing to devalue the US dollar. This is is encouraging investors to invest in corporate and government debt in non-US dollar currencies with higher interest rates. The US Federal Reserve said this morning it would 'twist' its portfolio of bonds to sell short-term bonds and buy US$400 billion of longer term bonds in an effort to lower long-term interest rates.
For New Zealand companies such as Transpower and Unison, which recently raised US$100 million in the US private placement market, the attraction is cheap, long-term funding.
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 suit.
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