In a sign of the times ASB is borrowing NZ$600 million through a five-year bond issue that will pay investors an interest rate of just 1.83% a year.
The fixed-rate ASB unsecured unsubordinated notes were priced at a margin of 0.85% over the swap rate on Tuesday. The pricing was at the low end of an indicative margin of 0.85% to 0.88% per annum.
ASB confirmed the offer as recently as Monday with the closing date brought forward by a day. The offer sought $100 million but was open to unlimited over subscriptions. ASB says the money borrowed will be used for "general business purposes."
The ASB bond issue comes after the Reserve Bank, in a surprise move, cut the Official Cash Rate (OCR) by 50 basis points last week to just 1%. Many economists are picking the OCR will go even lower.
In a similar offer late last month, before the OCR cut, Westpac NZ borrowed $900 million through a five-year bond issue that will pay investors 2.22% per annum. That Westpac offer is the equal biggest non-government debt issue made in NZ.
The ASB offer was open to institutional and retail investors in New Zealand and "certain" offshore institutional investors. The minimum application amount was a retail investor friendly $5,000. The ASB notes will be issued on August 19. They're expected to be quoted on the NZX and have an AA- credit rating from S&P Global Ratings, and an A1 rating from Moody’s.
There's more detail available in a terms sheet here.
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