Kiwibank has confirmed it will seek up to NZ$150 million through an offer of bonds that'll carry a speculative, or "junk," grade credit rating.
The bank, which is a subsidiary of State Owned Enterprise New Zealand Post, says the retail offer of unsecured, subordinated bonds will provide Kiwibank with additional capital to help meet its growth aspirations.
Kiwibank says the bonds will pay interest semi-annually with the interest rate for the first five years until December 15, 2017 and margin set and announced on Tuesday November 13 after a bookbuild, which has a range of 5.80% to 6%.
The bonds are expected to have a BB+ credit rating from Standard & Poor’s, which is the credit rating agency's highest speculative, or junk, grade rating, - as opposed to investment grade ratings that start from BBB-.
S&P downgraded Kiwibank itself to A+ from AA- last week.
The bonds will be treated as "tier 2" capital instruments under the Reserve Bank’s Basel III regulatory framework. The bonds have a maturity date of December 15, 2022 but may be called by Kiwibank from December 15, 2017, or potentially earlier.
Kiwibank says the offer will open on Wednesday November 14 and close on Wednesday December 5. Craigs Investment Partners is the arranger and joint lead manager alongside Kiwibank itself. ANZ and Forsyth Barr are co-managers.
(Update adds interest rate range for bookbuild).