Lured by attractive pricing and long duration, several other New Zealand utilities are eyeing potential debt issues in the US private placement market following recent debt raisings there by Transpower and Vector.
Debt market sources told interest.co.nz that another three or four firms were eyeing the US private placement market, attracted by diversification away from bank debt at long borrowing terms and enticing prices.
One source suggested 10 to 12 year money was on offer at similar spreads to what the companies would get for five to seven year money in New Zealand.
“Virtually every utility has had a look and non-utility corporates who it might work for as well,” said another source.
This source said all State Owned Enterprises would fit into “the sweet spot” of what US investors look for given their strong credit ratings.
US debt investors face an extended period of near zero official interest rates and the prospect of the US Federal Reserve launching a new round of Quantitative Easing to devalue US dollars. This is is encouraging them to invest in corporate and government debt in non US$ currencies with higher interest rates and strong currencies.
Transpower last week said it had raised US$150 million, or NZ$203.5 million, through a 12 year debt placement to 10 US based institutions. The issue will pay 3.6%, or 1.1% above 10-year US Treasury bonds. The national grid operator said the proceeds had been swapped back into New Zealand dollar exposures to avoid currency risk.
Vector announced late last month that it had raised about US182 million, or NZ$250 million, of unsecured notes due to mature in December 2022, via a private placement to US institutional investors.
A spokeswoman for Mighty River Power said the company was exploring a range of options and the US private placement market was one of them. A spokesman for Genesis Energy said his company had no plans to tap the US private placement market, at this stage.
A spokesman for Fletcher Building, which raised US$325 million in the US private placement market in 2007 to help fund its NZ$1 billion Formica acquisition, said the company wasn’t actively looking to raise any money in the US private placement market given its strong balance sheet and low gearing.
“However it is a market that is great for providing borrowers with duration - ie long term dated debt – so we may well look to access it in the future when we get to the point of wanting to lengthen our debt maturity profile further,” the Fletcher spokesman said.
Also see Roger J Kerr's recent article: How low rates overseas and corporate debt raisings offshore will force the RBNZ to hike the OCR here.
Meanwhile, ASB has opened an offer of five-year senior bonds targeted at institutional investors.
ASB is seeking NZ$150 million, plus oversubscriptions, and will pay 175 basis basis points over the swap rate.
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