Telstra seeks $200m in bonds

By PETER GRIFFIN

Telstra is planning to raise up to $200 million in its first New Zealand bond issue, but wants to tidy up debt rather than raise money for a major expansion of TelstraClear.

ANZ Investment Bank and Westpac Institutional Bank will manage the bond issue, which will have a seven- to 10-year term attached.

It follows a successful commercial paper programme launched in 2002.

"We've a little bit more than $200 million on issue there and it's been an efficient, liquid part of the market," said Telstra corporate treasurer Cliff Davis.

After injecting Australian dollars into TelstraClear, Telstra was now keen to replace them with locally raised money, he said.

"When we started off, because there was a certain amount of New Zealand dollars we needed instantly, we took Australian dollar borrowings and swapped them into New Zealand dollars.

"That's not quite so efficient. The commercial paper allowed us to retire some of the swap debt and we're looking to replace the remaining debt with New Zealand dollars."

Financing TelstraClear from locally raised funds avoided swap transactions, which Davis said were becoming "more complicated to account for".

TelstraClear posted a maiden profit of $2.7 million for the year to June 30 on revenue of $692 million, reversing last year's loss of $157 million.

There has been speculation that TelstraClear may be gearing up for a major network investment. However, it has signalled no major increases in capital expenditure.

Telstra has just raised €500 million ($917 million) in a European 10-year bond issue and will embark on a A$500 million ($535 million) bond issue as well.

Davis said Telstra had waited to learn the outcome of the Australian general election before launching its New Zealand bond issue.

"There's a healthy appetite for strongly rated corporate bonds. It's a liquid, soundly priced market."