Westpac NZ's bumper bond booty

Westpac NZ has made one of this country's largest ever non-government debt issues, raising NZ$900 mln for an offer that was notionally seeking NZ$100 mln

Banking

Westpac NZ has made one of this country's largest ever non-government debt issues, raising NZ$900 mln for an offer that was notionally seeking NZ$100 mln

24th Jul 19, 1:59pm by David Hargreaves

Westpac NZ's enjoyed spectacular success with its five-year medium term note issue launched this week that was notionally seeking NZ$100 million but with "unlimited" oversubscriptions potentially to be accepted.

Well, it didn't get 'unlimited' oversubscriptions - but it got a lot. Nine times as much as it was asking for, in fact.

The final size of the issue will be some $900 million, making it one of the largest non-government debt issues in New Zealand. Rabobank also borrowed NZ$900 million through a 2009 bond issue.

And the price to Westpac NZ is at the low end of indications given when the offer opened on Monday (July 22).

At the time Westpac gave an indicative margin of 0.85%-0.9%, with an indicative interest rate of 2.26% to 2.31%.

The margin's actually been set at 0.85% and the interest rate is 2.22%, with the offer open to retail investor friendly minimum applications of $5,000.

The incredible success of the offer can be seen as an indication of the search and appetite for yield in a global environment of disappearing yields.

The notes will be issued next Monday (July 29) and have an expiry date of July 29, 2024.

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22 Comments

by Joe Wilkes | 24th Jul 19, 2:19pm 1563934773

First in, best dressed!

by Mark L | 24th Jul 19, 2:27pm 1563935253

In an OBR event would the holders of these notes lose out before bank customers?

by Gareth Vaughan | 24th Jul 19, 2:39pm 1563935951

Here's how the OBR might work if it was ever implemented. Remember the government would have to approve its use - https://www.interest.co.nz/bonds/64411/if-bank-failed-and-open-bank-resolution-policy-was-implemented-how-would-it-affect-bank

by dictator | 24th Jul 19, 2:42pm 1563936148

It's not my field but bondholders are usually in the same boat as other unsecured creditors. The equality may differ due to any bank regulations around bank customers.

Right now I'm not surprised at any bank issuing bonds for capital purposes.

by Gareth Vaughan | 24th Jul 19, 2:55pm 1563936941

These Westpac bonds will not serve as capital for the bank.

by dictator | 24th Jul 19, 3:12pm 1563937956

In that case I'm wondering what hair brained scheme they have planned.

by Gareth Vaughan | 24th Jul 19, 3:49pm 1563940148

It will help them with their core funding ratio requirements and help fund a few loans, cheaply...

by Glitzy | 24th Jul 19, 2:42pm 1563936167

Its nice they are doing Lehman minibond size clips for mom and pop. What could possibly go wrong there ?

Its good there was an article the other day about RBNZ potentially having the potential to covert this type of debt to equity *with a big haircut in the event of a bank failing and needing to be restructured.

Eyes open and all that funky stuff.

by mikekirk29 | 24th Jul 19, 3:31pm 1563939099

Return on your money v return OF your money.
Westpac is in more trouble than anyone in NZ thinks
Class action ongoing...

by Gareth Vaughan | 24th Jul 19, 3:39pm 1563939588

What class action are you referring to?

by Joe Wilkes | 24th Jul 19, 4:08pm 1563941286

I think Mike is referring to this class action in Oz for mis-selling of home loans.

https://www.google.co.nz/amp/amp.abc.net.au/article/10830792

by Nzdan | 24th Jul 19, 4:44pm 1563943472

Sheesh. That’ll be one to watch.

by antonymouse | 24th Jul 19, 5:29pm 1563946182

Remind me what the definition of a loan-shark is....

by Hamish | 25th Jul 19, 9:02am 1564002172

I blame greedy boomers hungrily seeking returns on their term deposits.

by Pietro | 25th Jul 19, 9:09am 1564002574

I’ve just followed this link and I have to say surely it is the responsibility of the borrower to assess what they can afford to repay? The person featured has ‘lost all of our investment properties’. Go figure. V little sympathy for someone who leverages up to the hilt then is caught out by their own greed.

by Joe Wilkes | 25th Jul 19, 9:28am 1564003736

I have little sympathy either. But greed is a trait that is often accompanied by another - stupidity.

by Joe Wilkes | 24th Jul 19, 8:58pm 1563958730

Hi Gareth, were you not aware of this case?

by TainuiBabe | 26th Jul 19, 7:48am 1564084125

Hi Joe

I personally would not touch any bond that is being issued by a bank right now, especially Westpac. ANZ is the most recent bank which is facing class action also.

by Te Kooti | 26th Jul 19, 9:03am 1564088606

Those of you commenting need to untangle your dislike of the banks (valid) from questioning their financial viability as going concerns (not valid). They are some of the highest rated and best capitalised banks on the planet. In questioning their ability to service their liabilities, all you do is reveal your financial illiteracy.

by Davo36 | 26th Jul 19, 9:21am 1564089671

You know they borrowed money from the Fed last time round right? They basically had to be bailed out.

But the whole time the RBA and the Aussie government made several assurances that "The banks are strong". This line was repeated over and over again by them and in the media.

They lied to the Aussie public. And got away with it.

https://www.moneymorning.com.au/20101203/nab-and-westpacs-secret-bailou…

by Te Kooti | 26th Jul 19, 10:29am 1564093785

With all due respect, you're just embarrassing yourself. TAF was a liquidity tool the FED used to maintain liquidity in the financial markets, the same as most CB's including RBNZ and RBA. The loans were collateralised, so banks had to pledge loans to borrow. Banks used these facilities principally because they were cheaper than other sources of funding, not because they were actually locked out of funding. $4bn is trivial to a $750b balance sheet.

Do some reading before you make ignorant comments

by paulkingnz | 29th Jul 19, 11:27pm 1564399625

Keep drinking the kool aid Te Kooti