Auckland City prepares for first offshore debt sales with US$2.5 bln Euro MTN programme

Monday 12th December 2011 1 Comment

Auckland City is preparing to make the first overseas bond sale permitted by a New Zealand local authority after hiring HSBC to arrange a US$2.5 billion Euro Medium Term Note programme.

The nation’s largest city was given permission to issue bonds overseas as part of law changes that created the Local Government Funding Agency, which aims to sell debt on behalf of some 40 local bodies, giving them the economies of scale to make such issues worthwhile. Auckland can make sales in its own right due to its size.

The facility “is a core part of council’s strategy to diversify its funding sources and lengthen the term of its borrowing,” the city council’s chief financial officer, Andrew McKenzie, said in a statement. The council plans to fully hedge any currency exposure related to the borrowing.

Local authority debt is forecast to more-than double to $11 billion in the next decade from about $5 billion now, according to the LGFA. It currently has 18 councils as members and expects that number to grow to 40.

Until the law change, councils have only been able to sell into the New Zealand debt market, limiting their ability to seek to raise funds in markets with the cheapest borrowing costs.

Standard & Poor’s last month completed its annual review of Auckland Council’s AA credit rating and have put it on CreditWatch with negative implications.

BusinessDesk.co.nz

Comments from our readers

On 12 December 2011 at 12:31 pm Peter Haynes said:

Hi, Auckland City Council went out of existence over a year ago. The new Auckland Council covers an area from the Kaipara almost to the Waikato River. Most of the 5,600 Km2 is rural. That's why it's not called Auckland City.