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BusinessDesk: IAG sets 7.5% coupon for sale of up to NZ$250 mln of 2036 reset bonds

BusinessDesk: IAG sets 7.5% coupon for sale of up to NZ$250 mln of 2036 reset bonds

Insurance Australia Group, the Australian insurer whose brands include State Insurance and NZI, will pay at least 7.5% in annual interest to bondholders in New Zealand to raise as much as NZ$250 million.

The insurer is offering NZ$150 million of unsecured, unsubordinated notes to the New Zealand public, with an option to extend that by a further NZ$100 million, it said in a statement.

The bonds will mature in 2036, paying a minimum interest rate of 7.5% until 2016, resetting every five years from the issue date. The bonds, which are to trade on the NZX debt market, have been rated A- by Standard & Poor’s.

The issue is part of the insurer’s ongoing capital management programme, with net proceeds used for general corporate purposes and offering it flexibility for future refinancing, it said. Joint lead managers are ANZ, Bank of New Zealand, Craigs Investment Partners, Forsyth Barr and UBS New Zealand, while co-managers are Macquarie and Westpac Banking.

The Australian insurer’s New Zealand businesses posted a second-half loss of A$86 million from claims from the Canterbury earthquakes and rising costs of reinsurance. IAG’s shares were unchanged at A$3.13 on the ASX today, and have shed 19% this year.

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These unsubordinated notes;  Are these what the Yanks call "Junk Bonds"?