Bonds

[kiwi2007]

BNZ announced it's considering a BBB rated  perpetual bond with an interest rate around 7%. BNZ to pay transaction costs.

QUOTATION NOTICE: NZX DEBT MARKET BANK OF NEW ZEALAND ("BNZHA") PERPETUAL PREFERENCE SHARES

Company: Bank of New Zealand ("BNZ")

Security Code: BNZHA

ISIN: NZBNZEP001C9

Details of Issue: NZ$375,000,000 of perpetual preference shares ("PPS").

Offer Opening Date: Monday, 29 May 2023

Offer Closing Date: 12:00pm on Friday, 2 June 2023

Maturity Date: Not applicable

Rate Reset Date: 4 June 2029 and each quarterly Schedule Distribution Payment Date after that date

Distribution Rate: 7.30% per annum until 14 June 2029. After this date, the distribution rate will be a floating rate.

Distribution Payment Dates: 14 March, 14 June, 14 September and 14 December in each year and, if the PPS are redeemed, the date on which the PPS are redeemed.

[kiwi2007]

Doesn't appear to be any scaling on the BNZHA above. Contract notes are out and, for those that missed it, or want more Chris Lee has a few left on a first come, first served basis.

Edit: Reset rate after 6 years will be 3% on top of the 3 month bank bill rate.

[kiwi2007]

From Chris Lee

Genesis Energy - new subordinated capital green bond, with further details to be announced next week.

Interest rate around 6.50%  - maturity date of 30 years - election process after 5 year enabling investors the chance to be repaid early if the election process is successful.

Genesis Genesis covering transaction charges.

[mcdongle]

I see FCGHA is getting called..

[kiwi2007]

Genesis Energy Limited (GNE) has announced a new capital bond.

A minimum interest rate of 6.50%p.a.

Maybe better buying the shares for income?

[Davexl]

This Heartland Bond was not popular at all. I think it's the first time in a while that I've seen an offer where the full potential over-subscri[ption amount is not taken up - in this case they allowed for 50m over-subscriptions but have only had takers for 25m. There was no scaling on this. I guess there's a message in that.

And yet they come highly recommended by Chris Lee, Heartland is well managed - Fitch has them rated BB+ ?

[Basil]

Welcome to the forum Davexl, its good to have you on board.
My understanding is the structure of the new Heartland bond is its ranks behind everything except shareholders' funds. Not 100% sure but I think the security interest is lower than the other bond Heartland have (HBL020 last traded at 6.9%).
Regional banks have come under a lot of pressure in the US, bank index down 30% in the first half.
Heartland's official credit rating suggests a 1 in 30 year chance of a default event in the next 5 years.
My read on that is with the recent stress on smaller banks here there's a 1 in 30 chance of a default event in the next year, not 5 years as if there's a default through a funding shortfall its probably going to happen in the next year.
As I see it you'd really want a 3.3% yield premium to other quality commercial paper.
HBLIT2 last traded at 8.02%.

Lot of good quality lower risk corporate bonds that I prefer trading in the mid 7% range.
For example, one I hold is ARV010 last traded 7.57%.  The gearing is the lowest in the sector at about 30% and those bonds rank equally under a security trust deed with bank debt.
Heck even Mercury bonds 2027 maturity, MCY050 traded at 7.11% on Friday.  Extremely unlikely a power company their size is going out of business anytime soon.  I think you can "bank" on that !

[Henry Filth]

And yet they come highly recommended by Chris Lee, Heartland is well managed - Fitch has them rated BB+ ?

FWIW I try to keep the "average credit rating" of the bond portfolio at A or better.

So I wouldn't touch anything with a rating below BBB+. Heartland may be profitable, Heartland may be well managed, but you're buying the bond and it's covenants not the company itself.

[Davexl]

FWIW I try to keep the "average credit rating" of the bond portfolio at A or better.

So I wouldn't touch anything with a rating below BBB+. Heartland may be profitable, Heartland may be well managed, but you're buying the bond and it's covenants not the company itself.

Thanks very much for that Henry. Reminds me of what my Dad used to say about investment grade or above!
David

[Davexl]

Welcome to the forum Davexl, its good to have you on board.
My understanding is the structure of the new Heartland bond is its ranks behind everything except shareholders' funds. Not 100% sure but I think the security interest is lower than the other bond Heartland have (HBL020 last traded at 6.9%).
Regional banks have come under a lot of pressure in the US, bank index down 30% in the first half.
Heartland's official credit rating suggests a 1 in 30 year chance of a default event in the next 5 years.
My read on that is with the recent stress on smaller banks here there's a 1 in 30 chance of a default event in the next year, not 5 years as if there's a default through a funding shortfall its probably going to happen in the next year.
As I see it you'd really want a 3.3% yield premium to other quality commercial paper.
HBLIT2 last traded at 8.02%.

Lot of good quality lower risk corporate bonds that I prefer trading in the mid 7% range.
For example, one I hold is ARV010 last traded 7.57%.  The gearing is the lowest in the sector at about 30% and those bonds rank equally under a security trust deed with bank debt.
Heck even Mercury bonds 2027 maturity, MCY050 traded at 7.11% on Friday.  Extremely unlikely a power company their size is going out of business anytime soon.  I think you can "bank" on that !

Thanks again for the good steering 'Basil'

[kiwi2007]

 Infratil new 6-year senior bond issue next week - around 7% pa.

[kiwi2007]

Infratil  6 year issued @ 6.9%

[kiwi2007]

And the bond wagon keeps on rolling:

Westpac Bank are about to offer a subordinated capital note with interest rate around 6.50%. And with a strong credit rating of A-

[kiwi2007]

For the first 5½ years of its recently closed $600 mln unsecured subordinated bond issue, Westpac will pay 6.73% pa.

Aug 4th. Scaled back. I was cut to 70%.

[kiwi2007]

Infratil Bond Offer

The Interest Rate for the 2031 Bonds will be the greater of:

a) the Minimum Interest Rate of 7.05% per annum, and

b) the sum of the Issue Margin and the Base Rate determined on the Rate Set
Date (1 September 2023).

The indicative Issue Margin range for the 2031 Bonds is 2.40% to 2.55% per
annum. The Issue Margin will be set following a bookbuild process on 1
September 2023 and will be announced by Infratil via NZX shortly thereafter,
together with the Interest Rate. In any case the Interest Rate will not be
less than the Minimum Interest Rate of 7.05% per annum.