KEY POINTS:
Rabobank Nederland is looking to raise up to $400 million in New Zealand as the listed debt market heads towards another record year.
Rabobank, a Dutch banking giant with more than $1 trillion of assets, said yesterday it was considering a public offering of capital notes, with an option to accept unlimited over-subscriptions.
Full details are expected next month. Rabobank did not say if the offer would be listed on the stock exchange.
New Zealand Exchange head of markets Geoff Brown said the listed debt market raising could exceed last year's record level.
Debt raised so far this year was $1.238 billion, compared with $2.68 billion in total last year.
Last week the consortium which bought Yellow Pages from Telecom said it was planning a $300 million debt issue to help pay for the purchase.
The listed debt market, where companies issue notes to raise capital, had almost doubled in the past four years to more than $9 billion and held more scope to grow, Brown said.
"I would have thought increasingly people will be looking at the quality of product, the transparency of that product and most importantly the ability to trade as being things that they require of their investments."
New Zealand had one of the largest listed debt markets in the world, Brown said.
Macquarie Equities investment director Arthur Lim said fixed interest had always been a large component of portfolios.
"Over the years if you look at investors in the marketplace they've always tended to favour number one property, number two fixed interest and then by a distant third equities.
"There's a certain amount of risk aversion as many New Zealanders, interestingly enough, still remember 1987 [the sharemarket crash] as if it was two years ago in terms of equity markets."
After adjusting for inflation, New Zealand had one of the highest real interest rates in the OECD, Lim said.
"In the global market credit spreads have widened so investors out there are demanding high interest rates to put their money in but certainly capital raising is still happening."
Rabobank was expected to get a good reception for its offering, he said.
AMP Capital Investors head of fixed interest Grant Hassell said the world was going through a liquidity squeeze.
"So I'm guessing they're also trying to get to the front of the queue in order to raise funds, which is an entirely sensible thing to do.
"I think that it is also a good alternative at the right time for a lot of New Zealand investors because we've just gone through a period where we've had some credit-relatedissues."
Globally credit markets were a mess, Hassell said.
"In that environment all credit spreads are moving very wide and people, investors like myself, are very nervous about stepping up and committing cash when every day we wait we're getting rewarded more and more by higher margins and cheaper debt to invest into."
Rabobank was one of the best rated banks in the world, Hassell said.
"You're not going to get your money back for 10 years but you are investing in one of the best rated banks that's out there."
The joint lead managers will be First NZ Capital Securities and ASB Bank, with Credit Suisse appointed as arranger.
CAPITAL NOTES
* Allow a company to sell debt to investors.
* The notes pay a fixed rate of interest for a set period.
* At maturity they can be held for a further period at a new rate, converted to ordinary shares, or repaid in cash.
* The unsecured, subordinated debt ranks noteholders behind other creditors if the company goes into liquidation.
