BNZ borrows $550 million at 3.648% via five-year bond issue as Chorus seeks at least $300 million in its own bond issue

BNZ borrows $550 million at 3.648% via five-year bond issue as Chorus seeks at least $300 million in its own bond issue

BNZ is borrowing $550 million at 3.648% per annum through a five-year bond issue.

The bank's issue of unsecured, unsubordinated fixed rate medium term notes was priced at a margin of 1.04% over swap on Wednesday. The bonds are being packaged in retail investor friendly minimum denominations of $5,000, and are expected to be quoted on the NZX Debt Market. 

The offer sought $100 million with BNZ additionally giving itself the option of accepting unlimited oversubscriptions. The bonds are due to mature on November 16, 2023. BNZ's terms sheet is here.

Separately Chorus has unveiled plans for an offer of 10 year unsecured, unsubordinated, re-setting fixed rate bonds to both retail and institutional investors. It's seeking $300 million plus oversubscriptions, and will pay an interest rate for the first five years of no less than than 4.35% per annum.

As reported last week, whilst there's been much gnashing of teeth over the dearth of initial public offerings on the share market this year, there's been no shortage of corporate bond issues. More than $2.415 billion has been borrowed by 20 wide ranging corporate issuers - excluding banks - at what are low interest rates by historic standards.

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So BNZ are paying less than their own 5 year term deposit rate (3.7%) for unsecured bonds? Righto.

Bonds are higher in the pecking order for recoveries so less risk

Do the bonds have a higher security ranking than retail depositors under OBR rules? If so, that may justify the gap. BUT, in any case, as the name 'unsecured' suggests, nothing comes even close to a covered bond security. To be honest, if you actually look at the security of lending a bank your money, you wouldn't really give them anything unless a covered bond holder...

Also the time premium. A 1 year BNZ term deposit is at 3.45%. for the extra 4 years of risk you only get 0.2%. I'm not seeing the value.

You can sell Bonds on the secondary market, to get your/some money back, if push-comes-to-shove. Banks do not have to break a Term deposit and can keep your money for the whole run if they so choose...or charge you a hefty penalty fee if they want.

Yes, "some" of your money back.. interest rates rise (or look like they will), your bonds market value drops. Rolling 1 yr term deposits seems like a better idea to me for that low premium.

thats true in an up interest market but the reverse at the moment, i had a lot of bonds at 7% straight after the GFC and they satyed that way for a good five years while interest rates tanked, maybe interest rates will rise but if they do it will be a slow climb as the debt mountain is too BIG

Fed is planning on raising, our own RB is staying non-committal, and in the top right of this page the swap rate charts all just jumped recently. You'd have to be braver than I to buy those bonds at those rates.