South Canterbury Finance's latest bond offer is expected to close fully subscribed as investors rush to tap into higher returns as talk of an interest rate cut looms.
The $125 million secured bond offer, which opened yesterday, is expected to pay interest of either 10.5 per cent per
annum or 2.75 per cent above the three-year swap rate, whichever is higher, and has a term of three years. It has already been underwritten by Forsyth Barr to $75 million.
Kapiti Coast broker Chris Lee said he expected the bond issue to be oversubscribed.
He said people were being attracted to bonds as it enabled them to get a high rate of interest for longer when interest rates at the bank were expected to drop.
When the bond was announced a few weeks ago it had an over subscription facility of $25 million but the company had since doubled this.
Chief financial officer Graeme Brown said the decision had come on the back of a two-week roadshow in the lead-up to the offer.
Brown said the bond offer was part of the firm's strategy to maintain a strong buffer to help with confidence in a changing market where further consolidation was expected. It currently has $250 million in the bank as well as a $150 million credit facility which it has yet to draw down on.
The bond offer was also about diversifying its funding sources.
Brown said the NZX-listed bonds offered the chance for people to trade them on a secondary market as well as opening up the ability for the company to target institutional investors.
However, he still expected two-thirds of the interest in the bond to come from mum and dad investors.
The bond offer is the second the group has undertaken, a $125 million offer in December also closed oversubscribed. The current offer closes on June 13.
