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A $400 million retail issue by giant French Bank Credit Agricole SA is likely to get a tepid response here from analysts and institutions, industry sources say.
France's biggest retail bank, rated 18th largest on the Fortune 500 list with assets of ¬331 billion ($643 billion), is following the footsteps of Dutch bank Rabobank, which successfully raised $900 million in the local retail bond market in September.
On offer are perpetual, deeply subordinated notes callable after 10 years. They are rated A by Standard & Poor's and Aa3 by Moody's.
A book build will be held today and tomorrow to price the notes but lead manager First NZ Capital gave an indicative range of between 9.37 and 9.57 per cent - around 130 to 150 basis points above the swap rate.
However, Credit Agricole's notes issued in the US are trading around 220 to 230 basis points above the swap rate, suggesting buyers are paying too much, one professional bond trader at Agricole's roadshow said yesterday.
The bond trader said New Zealand mum-and-dad investors had a history of paying too much for such issues.
Institutions were unlikely to touch it as they could obtain better priced paper elsewhere.
Questioned about the more attractive pricing in the US, Credit Agricole's Omar Ismael-Aguire said it was not relevant to compare issues from other markets. He said the US market was volatile at present because of the sub-prime mortgage crisis.
David Smith, of First NZ Capital, said although higher margins on similarly rated bonds could be found in the US market, banks were not issuing into that market.
Ismael-Aguire told financial advisers attending the roadshow: "If the market expects us to call the bonds after 10 years, then that's what we will do."
Another concern was that Agricole, unlike Dutch bank Rabobank, does virtually no business in New Zealand, and once the money had been raised, had no interest in supporting a secondary market.
- NZPA
