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Kiwi corporates eye debt raisings in the US private placement market

Kiwi corporates eye debt raisings in the US private placement market

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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3 Comments

Something is rambaling here, there and everywhere !

FYI, this just announced:

Mighty River Power today announced that it has successfully raised US$200 million in the Company’s inaugural private placement with US-based institutional investors. 

The private placement consists of a combination of 10, 12 and 15 year notes with settlement of the transaction expected to be in December 2010.

The proceeds will be used to refinance existing short-term bank debt and will provide long-term funding that further strengthens the Company’s average debt maturity profile from the current 4.9 years to 7.5 years.                                      

Mighty River Power Chief Executive Doug Heffernan said that the Company was very pleased with the result of its first transaction in the US private placement market, which provided further diversification of its funding sources and offered longer-term funding options than are currently available in New Zealand.

National Australia Bank / Bank of New Zealand acted as the sole arranger of the private placement.

 

And another eyes cheap US credit -

Auckland International Airport Limited advises that it is presently conducting a road-show in the United States to investigate the possibility of issuing notes to the US private placement market as part of its debt portfolio.

If a placement takes place, it will be used to refinance debt maturing in March 2011.

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Days to the General Election: 38
See Party Policies here. Party Lists here.