Kiwibank is borrowing $400 million through a five-year retail bond issue that will pay investors interest of 2.155% a year.
The bank's unsecured, unsubordinated fixed rate medium term note offer has been priced at 1.07% over swap rate, after an indicative price range of 1.05% to 1.10% was announced earlier this week. Interest will be paid twice a year in arrears. Kiwibank's five-year term deposit rates range from 2% to 2.70%.
Kiwibank had sought to raise a minimum of $100 million, and says money raised will be used for general corporate purposes, including lending.
The Kiwibank bond issue follows two even bigger recent ones from rival banks. On August 14, a week after the Reserve Bank cut the Official Cash Rate (OCR) to just 1%, ASB said it was borrowing $600 million through a five-year bond issue that will pay investors an interest rate of just 1.83% a year. And prior to 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 New Zealand debt issue.
The Kiwibank bonds will be issued next Friday, September 20, and are set to mature five years later on 20 September 2024. The bonds are expected to have an A1 credit rating from Moody’s, and AA from Fitch. These credit ratings are in line with Kiwibank's own ratings.
The Kiwibank bonds will not be listed on the NZX debt market.