Auckland Council, which put a bond issue on ice in October after a court ruling suggested it had liability for leaky commercial properties, says it's again considering an offer of fixed-rate secured bonds to the public.
The council says it's seeking preliminary indications of interest and full details of the bond issue will be released when the offer opens next Monday, December 10. ANZ and BNZ have been appointed joint lead managers.
Back in October Auckland Council said it would seek up to NZ$175 million through a six-year, fixed-rate, secured retail bond offer. It had planned to price the bonds at a margin of 1.08% per annum over the six-year swap rate.
However, the offer was postponed after a court decision against the old North Shore City Council, now part of Auckland Council, in relation to the Spencer on Byron Hotel. The Supreme Court held that councils owe a duty of care to the owners of all buildings whether they be residential or commercial, with this duty to ensure those buildings comply with the building code.
"Until this decision, there has been some doubt as to whether or not the owner of a commercial building was entitled to sue a council for damages reflecting the cost of bringing the building up to standard. Auckland Council’s financial statements include provisions for potential future liabilities for residential properties with weathertightness issues, but not commercial properties," Auckland Council said in October.
Its investment statement for the planned October bond offer disclosed a NZ$417 million provision in its accounts for the likely costs to be incurred as a result of active, reported and unreported leaky homes claims. Because of the Supreme Court ruling, Auckland Council said it had decided to defer its bond offer, which it would re-launch once its staff had considered the implications of the court decision.
Today the council said the new bonds would form part of its overall borrowing programme to fund investment in the likes of electric trains, its proposed city rail link and opening up Auckland's waterfront. "Ratepayers and other retail investors can register their interest with one of the Joint Lead Managers or a financial advisor. A copy of the investment statement for the issue will be sent upon release," Auckland Council says.
Credit ratings agencies Moody’s and Standard & Poor's both recently affirmed their Auckland Council ratings at Aa2 and AA, respectively.