The Covered Bond Report

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Swiss franc investors know ‘New Zealand story’, says Kiwibank

Kiwibank inaugurated its covered bond programme with a Sfr150m long seven year deal yesterday (Monday) that was also its first public offshore unguaranteed issue, the bank’s head of funding told The Covered Bond Report.

Kiwibank imageLeads Barclays and UBS priced the December 2020 issue at 13bp over mid-swaps, tightening the spread from initial price thoughts in the15bp over mid-swaps area and guidance at 14bp over. The deal size was fixed at Sfr150m (Eu123m, NZ$190m), after the transaction was announced as a Sfr100m minimum, Sfr150m maximum issue.

Geoff Martin, head of funding at Kiwibank, told The CBR that the transaction followed positive investor feedback the bank received during a European roadshow that ended on 7 March.

“The good reception on the roadshow in early March provided the impetus to proceed with a launch this week,” said Martin.

Kiwibank decided to target the Swiss franc market for three reasons, according to Martin.

“First, there’s a long history of New Zealand issuers accessing that market and therefore a good understanding among investors of the ‘New Zealand story’.

“Second, the size of a liquid transaction suits Kiwibank’s modest funding task, and third funding diversification.”

The transaction was Kiwibank’s first offshore issuance in public markets, said Martin, apart from an Australian dollar medium term note issued in 2009 under a New Zealand government wholesale guarantee scheme.

Kiwibank started working on a covered bond programme early last year. A guarantor for a the programme, Kiwi Covered Bond Trustee Limited, was incorporated on 16 May 2012, and on 13 June Fitch assigned the bank a long term foreign currency rating of AA. The covered bond programme was assigned provisional triple-A ratings by Moody’s and Fitch this month.

“Kiwibank established the covered programme to build funding capacity, provide duration and diversity and provide access to debt markets in difficult times,” said Martin.

“From an issuer’s perspective, covered bonds have performed very well during the periods of market dislocation.”

Asked about the likelihood of Kiwibank issuing covered bonds in other currencies, Martin said that Kiwibank will continue to assess funding opportunities in senior and covered markets both domestically and offshore.

Kiwibank’s programme is structured on a contractual basis, as New Zealand covered bond legislation is still going through the country’s parliament.