Money at Work: NZ Post subordinated notes

What is it called and what sort of savings product is it?
NZ Post Group Finance subordinated notes offer.

Who is the company behind it?
The actual company is a subsidiary of NZ Post. NZ Post itself has a number of other subsidiaries and business in the finance, courier, transport and information technology sectors. These include Kiwibank, CourierPost, ECN Group, NZ Home Loans and Kinetic.

Who is the target market?
This is another investment appealing to investors wanting a good interest rate.

What return does it offer?
The rate will be set on March 24, but is expected to be around the 7.50 per cent mark.

When was it launched?
March 25 and is expected to close on April 22.

What other products is it like or is it competing with?
NZ Post is just the latest to join a long line of firms competing for your money through a corporate bond issue.

Is it long term, short term or medium term?
Technically this is a long term investment with a 30-year maturity, however in reality it is more likely to be a five year maturity.

What is the unique selling point?
NZ Post has set this up differently to other corporate bond offers as it has a 30-year maturity which technically makes the funds count as equity on its balance sheet, not debt. Also it has an option to redeem or renew the notes after five years. If they are continued the interest rate will increase by 1 per cent.

How strong a stomach do you need for it?
NZ Post has an A rating from Standard & Poor's which suggests it is very secure. While NZ Post is a state-owned enterprise the notes are not government guaranteed.

What's the hitch?
The complicating factor for many investors will be understanding what happens at the five year mark and subsequent five year review periods. NZ Post has options to redeem the notes or remarket them. Also investors should be aware the notes only have two interest payments a year, not four like most other bonds.

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