Auckland City heads offshore for $2.5b

Auckland Council looks set to be the first local authority to head offshore to raise funds. Photo / Herald on Sunday

The Auckland Council looks set to become the first New Zealand local authority to raise funds overseas.

International trading bank HSBC said in a statement that it had arranged a US$2.5 billion euro medium term note (EMTN) programme for the council, which will enable it to access offshore capital markets.

EMTNs are issued directly to the market with maturities of less than five years. They are offered continuously, rather than all at once.

The move was made possible following a change in legislation in September.

Local authorities previously were only able to borrow money domestically, which limited the number of investors who could participate in their bond issues.

HSBC's New Zealand chief executive Noel McNamara said the programme would see the council lead the way for local authorities to borrow offshore.

"It also clearly highlights the advantages that borrowing in a currency other than New Zealand dollars can provide and ensures the council has the widest range of investors open to it to meet its funding needs," he said.

The council's chief financial officer, Andrew McKenzie, said the successful launch of the facility was part of council's strategy to diversify its funding sources and lengthen the term of its borrowing.

"In going overseas, we will achieve both objectives and leverage off our position as one of the best rated institutions in the country," he said

Auckland Council intends to fully hedge any currency exposure related to the borrowing.

HSBC is part of Hong Kong-based Hongkong and Shanghai Banking Corp.

The move is separate from the newly-established Local Government Funding Agency, which was formed to allow local authorities to club together to sell their bonds offshore.

Auckland Council is one of agency's members, but it can also borrow overseas in its own right because of its size.