ASB seeks $350m in debt issue

ASB Bank subsidiary ASB Capital is seeking $350 million through a perpetual preference share issue which opens today.

Peter Hall, ASB's head of institutional banking, said the issue had been "enormously" over-subscribed thanks to interest from retail investors. ASB has run a three-week application of interest programme through brokers.

If successful, it will be New Zealand's biggest-ever hybrid security issue, overtaking Vector's $307 million capital bond issue in 2002.

Perpetual preference shares, effectively a form of debt raising, have no set maturity date. The shares will pay fully imputed quarterly dividends with an initial 7.65 per cent interest rate. The dividend will be reset annually.

The issue follows a $200 million perpetual preference share issue by ASB in 2002.

Arthur Lim, Macquarie Equities investment director, said perpetual preference share issues utilise imputation credits that ASB's parent, Commonwealth Bank of Australia, could not otherwise use and reduce interest costs on debt.

Hall said the money raised would be used to support the bank's capital base and growth through "general group purposes". Lim said Australian banks typically used money raised in New Zealand to buy back their own shares in Australia.

Hall suggested a dearth of similar offerings in the market had boosted interest in the shares, which have a Standard & Poor's A- credit rating.

The minimum investment is $5000. The issue will close on December 21 with trading starting from December 23.