Auckland City's new 5-year bonds to pay 6.28% annual interest:

Monday 22nd March 2010

Auckland City Council set the coupon on its five-year bonds at 6.28%, just 3 basis points above the minimum rate it offered when the bonds were sold.

The $350 million of March 2015 bonds are to commence trading on the NZX’s debt market starting on March 25. The sale is a coordinated effort by the city’s councils in the run-up to the merger to create the Auckland super-city this year. Under an agreement between Auckland and the other existing councils it will replace, ACC may on-lend the proceeds of the bond sale to help fund “important regional capital projects.”

In December, rating agency Standard & Poor’s downgraded the council’s credit rating to AA- from AA with a stable outlook, saying the combined council would have to raise debt to fund the completion of major infrastructure projects.

Andrew McKenzie, council finance general manager, said he was disappointed by the down, which reflected a poor understanding of the New Zealand local authority sector.

“The new council will be subject to the same legislative controls to operate in a financially prudent manner as Auckland City Council, which has a strong cash operating surplus and low-risk operations,” McKenzie said. “The new council retains the ability to rate and its rating base will be almost three times the size of Auckland City Council’s.”

Bank of New Zealand and Westpac Banking Corp. arranged the sale with First NZ Capital Securities Limited and Goldman Sachs JBWere (NZ) also acting as joint lead managers.

Businesswire.co.nz

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