BNZ raises $200m to help repay $350m bond early

BNZ exercised its right to repay the $350 million in 'callable' June 2017 bonds early. Photo / NZPA

Bond investors got a taste of the new lower interest rate environment on Friday when the BNZ successfully completed a $200 million 7-year bond issue, which carried a coupon rate of 5.64 per cent, and repaid a 10-year, 8.42 per cent, bond five years before it was set to mature.

The bank said that it had exercised its right to repay the $350 million in "callable" June 2017 bonds early. Bonds that are callable mean the issuer can repay, or call, the bond before its maturity date, or reset the coupon rate.

The issue, priced at a 215-basis-point premium over the equivalent benchmark swap rate, was designed to partly cover the repayment. The BNZ sought to raise a minimum of $50 million and had capped the offer at $200 million.

Mike Faville, BNZ's head of debt capital markets, wholesale banking, said the issue attracted broad support.

He said the issue targeted institutional and habitual investors, but that the bonds will also be available to retail investors.

In December, BNZ raised $200 million through another 7-year bond issue.

Kiwibank in March paid out investors in its $75 million, 10-year, 7.72 per cent coupon bond five years early.

Early the same month, ANZ National "called" a $250 million, 7.6 per cent, bond. A handful of other banks, each of them paying interest rates set in 2007 before the onset of the global financial crisis, are in the same boat.

ANZ National has $350 million in July 2017, 8.23 per cent bonds, callable on July 23, and ASB Bank has $370 million in December 2017, 8.77 per cent bonds, which are callable on November 15.