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Bank of China undeterred after offering ‘premium’ return in first NZD bond sale


Bank of China New Zealand raised $150 million in its first NZD bond sale and says having to offer a higher return than similarly rated local corporates hasn’t put it off the local debit market.


The lender, which has an A credit rating at Standard & Poor’s, was registered with the Reserve Bank in November 2014 and the sale of five-year bonds is the first under its recently established medium-term note programme, meaning it’s a newbie in the New Zealand market.


The October 2022 bonds carry a coupon of 4.09 percent, which was a margin of 135 basis points over the 5-year swap rate. That’s higher than the rate on Auckland International Airport’s April 2023 bonds sold this month of 3.62 percent, which included a margin over swap of 82 basis points, even though the airport’s credit rating is one notch lower than bank of China’s at A-.


Auckland Airport “has a lower credit rating i.e. considered higher risk, than BOC yet was able to issue at a significant discount due to name recognition and familiarity,” said BOCNZ treasurer Craig Vickery. He also noted that state-owned Kiwibank is able to issue bonds at lower interest rates than BOC, even though it has the same credit rating.


In announcing the sale, Vickery said New Zealand investors “should get comfortable with Chinese credit as local Chinese banks become more involved in supporting NZ businesses.” He told BusinessDesk that institutional investors “are getting comfortable with BOC, the third Chinese bank to set up in New Zealand and begin using the NZ capital markets. But retail investors “are still going through a name recognition/familiarity phase with BOC which will take much longer.”


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