ANZ National first to issue offshore with NZ Govt guarantee

ANZ National became the first New Zealand bank to issue offshore with a New Zealand Government guarantee, when it issued US$1 billion of three-year bonds in the US s144A market on Thursday.

The issue was upsized from US$500 million and priced at 150 basis points over Libor and 204 basis points over Treasuries. Clearly, at this price there was a lot of demand.
 
The pricing of the AA+ rather than AA rated bonds indicates why there has not been any international issuance from the New Zealand banks until now. The parent, ANZ Bank, last issued Australian government guaranteed, US dollar denominated, three-year bonds in early February at Libor plus 56 to 59 basis points. Admittedly, these were small issues of only US$50 million each.

To find comparable issuance in terms of volume, ANZ issued US$750 million of five-year bonds in the US s144A market in early January, at 101 basis points over one month Libor, although this was reportedly taken up by a single investor. But in early December, the ANZ issued US$1.25 billion of three-year bonds in the same market, at Libor plus 100 basis points and subsequently topped the line up at Libor plus 90 points.

ANZ chief executive Mike Smith was reported last week as saying that he wants to get back to unguaranteed issuance as soon as possible but recent testing of the market has been unsuccessful. However, this issue by ANZ's subsidiary looks like a test of unguaranteed issuance for all practical purposes. Perhaps we can expect a benchmark size unguaranteed issue from ANZ shortly.

Presumably this deal qualifies for the reduction in the guarantee fee to 70 basis points for non-New Zealand dollar denominated bond issues. The New Zealand government announced the reduction on Thursday. The guarantee fee for New Zealand dollar denominated bond issues remains unchanged at 90 basis points.
 
In New Zealand's domestic market the Bank of New Zealand's minimum NZ$50 million retail bond issue launched the week before, was priced on Friday. The five-year bonds offered a coupon of the greater of 6.15 per cent or 175 basis points over swap and were priced at the latter to yield 6.7 per cent.

As expected, the coupon on the NZ$150 million retail bond issue from Auckland City Council, which closed the week before last, was set at 200 basis points over the five swap rate or 6.42 per cent on Monday.

And while Tower Limited was expected to allot up to NZ$100 million of five-year bonds during the week, the minimum NZ$80 million issue received oversubscriptions of only NZ$1.7 million. The coupon was set at 8.5 per cent.

New Zealand Post set the initial interest rate and credit margin on its thirty-year non-call five, subordinated bond issue on Tuesday. The interest rate was set at 7.5 per cent or 280 basis points over five-year swap. The coupon will step-up by 100 basis points if the bonds are not called.

New Zealand Post also confirmed that the issue had been upsized to NZ$200 million with oversubscriptions of NZ$50 million accepted.

Wellington City Council snuck in a small deal on Friday, issuing NZ$25 million of five-year bonds at 215 basis points over swap. The council is unrated and the bonds will pay a coupon of 7.13 per cent.

At the end of the first quarter total issuance in terms of all deals priced in the New Zealand market stands at just under NZ$2.5 billion, on our figures. This compares favourably with NZ$2.3 billion seen in the same quarter last year.