Continuous Disclosure: Port of Tauranga's 'crazily low' funding, and who's selling Pushpay?

Tesla has emerged as a hot favourite among New Zealand investors. Photo / Bloomberg

Corporates are lining up to tap into extraordinarily low interest rates.

This week Port of Tauranga raised $100 million through a five-year fixed-rate wholesale bond issue at just 1.02 per cent.

The issue was heavily oversubscribed, attracting $174m in bids through a book-build process.

Even at that ultra-low rate, the margin was 0.90 per cent per annum more than the underlying swap rate.

"It's crazily low money," says chief executive Mark Cairns.

"It says something about where we are going, perhaps, as we head towards a negative official cash rate."

The Reserve Bank this week kept its official cash rate at 0.25 per cent, but the market expects that rate to go negative next year.

"I was very surprised at how low the book-build rate was, at 1.02 per cent, and also to see it so heavily oversubscribed," Cairns said.

The issue was done through the Bank of New Zealand.

David McLeish, senior portfolio manager and head of fixed income at Fisher Funds, said there had been a lot of similar issues recently.

He expects to see more of the same while interest rates remain at historic lows.

Port of Tauranga has secured $100m in cheap funding. Photo / NZ Herald

"Some are refinancing upcoming maturities of debt but others are doing it for general corporate purposes, which basically means that they are being kind of tactical."

Port of Tauranga has a high credit rating and owns valuable infrastructure around the country — not just at Tauranga.

"Over the long term it is a very well run business with overall, a very low level of debt, and they are offering a yield that is 90 basis points over the swap rate," said McLeish.

"That, in the context of very low interest rates, is very attractive to an investor."

McLeish said there was another dynamic at play, where the banks themselves were less inclined to make certain types of corporate loans available but were motivated to introduce borrowers to the public debt market and to help arrange transactions for them, rather than doing the financing themselves.

Harbour Asset Management senior portfolio manager Shane Solly said the Port of Tauranga deal was what the Reserve Bank has in mind with its low interest rate regime.

"It's giving companies confidence to go out there and borrow and to do their work," he said.

"A number of businesses have looked to diversify their debt, and in some cases to extend to longer maturities.

"I've got to think that there is more to come," Solly said. "Certainly the market seems to have an appetite for it."

Pushpay selling

Some big lines of Pushpay stock went through the market this week, raising speculation that US small cap investment specialist Kabouter may be further reducing its holding in the company.

Kabouter said on September 10 that it had trimmed its holding in Pushpay, which specialises in digital solutions aimed at allowing churchgoers to make donations, from 6.3 per cent to 5.3 per cent.

On Monday, Kabouter said its holding had dropped to 4.11 per cent, below the 5 per cent required disclosure threshold.

On Wednesday, 2.4 million shares worth $18.7m went through the market, raising speculation that Kabouter was reducing its stake further.

But the selling in Pushpay has been met with strong buying. The stock last traded at $8.54, up 34 cents, and has been firming sharply throughout the week.

Tesla Tops

Electric car-maker Tesla continues to be the favourite US stock for New Zealand investors.

Kiwi investment platform Hatch and rival Australian trading platform Stake, which has 10,000 Kiwi members, both of which specialise in offering access to US stocks, confirm Tesla is the top traded company.

Hatch general manager Kristen Lunman reckons its popularity is driven by three main factors.

"You see a lot more of them driving around. One is the recognition — this almost inevitable move to EV — and so then you think, OK, if there is this inevitable move to EV, who is leading the pack? Without a doubt it's Tesla. I mean, they are delivering cars, the guy is sleeping under his desk in order to do whatever he can to get this business off the ground.

"I think there is sense of it is inevitable, who is leading the pack, how many years behind are all the others? Is it going to be one winner takes all?

The second thing is the Apple factor — the design is beautiful — so you have got this 'sex factor'."

Finally, Lunman says many believe Tesla boss Elon Musk has vision. "Like him or not, I think you would be hard pressed to find someone in our lifetime that has got this vision of the future and how things could and should be done. So people absolutely back the vision. It's a combination."

Stake co-founder and chief executive Matt Leibowitz — a former Wall St hedge fund manager returned home to Australia — says Tesla is top for both Kiwi and Australian investors on its platform.

"It is quite well known. It has been making high returns for a number of years. I think it is a company some people believe in and when it comes to electric vehicles, it is the leader.

Those numbers are not unusual and are similar to Australia." Apple is the second most popular for both Hatch and Stake investors. But Leibowitz says NIO — a Chinese-backed electric car marker — has made a surprising appearance as the third most popular on its platform.

"NIO coming third is interesting. It's another electric vehicle maker. I think New Zealanders are really clued in to what is happening around the world and they have seen the opportunity. Tesla has performed massively. It's a great result for people who got in early."

Where the IPOs are

While the local NZX is going through a drought in initial public offerings, the US market is in full swing, with more than a dozen IPOs set to go ahead this week.

On September 29 Palantir, the business of controversial Kiwi citizen Peter Thiel, is due to list. Palantir's IPO was originally set for Wednesday this week, but was pushed back a week.

Lunman says unlike other recent IPOs, Palantir will be a direct listing, meaning it will not raise new capital and will rely on the market to set the price for its shares rather than the typical pre-IPO auction held by investment banks.

Controversial Kiwi citizen Peter Thiel. Photo / Getty Images

In pre-IPO guidance from Palantir this week, the company predicted record growth of 42 per cent in 2020 with US$1.06 billion in revenue.

The company, which develops software for government agencies and large companies, has said its adjusted operating income will be US$121m, with a margin of 11.5 per cent.

Existing shareholders will be allowed to sell up to 20 per cent of their Palantir shares.

Lunman says there is a lot of interest in US IPOs from New Zealand investors.

Another IPO that will be interesting to watch in the Covid-19 environment is Airbnb.

Lunman says she is surprised it is still going ahead, given the hit the business will have seen from the pandemic.

"I think investors are ignoring this year full-stop and looking forward a year, and still looking at the potential growth of these businesses."