KEY POINTS:
BNZ Income Securities said yesterday that the dividend rate on its perpetual shares had been set at 9.89 per cent to the period to March 28, 2013 - lower than the 10.22 per cent originally advertised.
This comprises a benchmark rate (adjusted to a quarterly rate) of 7.69 per cent per annum plus a margin of 2.20 per cent.
BNZ said the rate differed from previously advertised indicative dividend rates because of a decline in the 5 year mid-market swap rate on which the benchmark rate is based. Dividends will be calculated and paid quarterly.
BNZ Income is seeking to raise between $350 million and $700 million. It received $320 million in the original book build and that had since grown to $420 million.
Some analysts see the issue as banks muscling in on finance companies which have had trouble getting people to invest following the collapse, or paralysis, of 16 finance companies in two years.
Analyst Bruce McKay said the BNZ offer is the first of what is expected to be a run of issues by banks looking to access "cost-effective" money from New Zealand investors.
He wrote in a recent column that "the finance company sector is hardly appealing at the moment, with rates on debentures sitting around 10 per cent to 10.5 per cent, compared to banks at between 8.5 per cent and 9 per cent. There just isn't enough of a premium being offered on finance company debentures to justify the risk for many investors; that's where an offer of shares in a near-bank company becomes interesting.
"You theoretically get the low-risk aspects of a bank deposit but you get a finance company-type return, and in a tax-effective manner."
Holders of BNZ Income Securities preference shares were not investing directly in the BNZ, but in an associate company of the bank, McKay said.
The idea was that the cash streamed from the BNZ to BNZ Income Securities would carry full tax imputation credits, which would form part of the return to investors.
Because it was a PIE, holders of the perpetual preference shares would get tax advantages as dividends would be excluded income.
- NZPA
