Kiwi Property Group to raise up to $125m in bond offer

Kiwi Property is the latest company turning to the NZX's debt market.

Kiwi Property Group wants to raise as much as $125 million selling seven-year bonds to repay bank loans and for general business use, joining the growing number of firms chasing cheaper capital through the listed debt market.

The Auckland-based company wants to sell as much as $75 million of fixed-rate senior secured bonds to New Zealand institutional and retail investors and will accept oversubscriptions of up to $50 million, it said in a statement. The bonds will pay annual interest of at least 4.25 percent and have an indicative margin of 1.45 percent to 1.55 percent. The offer opens today and the bonds will mature Dec. 19, 2024. New Zealand's seven-year swap rate was recently at 2.81 percent, implying the rate will be between 4.26 percent and 4.36 percent.

The company's weighted average interest rate for drawn debt was 4.84 percent as at Sept. 30, up from 4.61 percent six months earlier, and with an unchanged weighted average term to maturity of three-and-a-half years.

"Kiwi Property is committed to maintaining a strong financial position and has a long history of conservative gearing. The bonds will further diversify our sources of funding, extend the weighted average duration of our funding base," it said in a roadshow presentation for the bond offer.

The actual margin and interest rate on the bond will be announced after the bookbuild process, expected to take place Dec. 12. The term sheet will be updated to include the margin and the interest rate and will be released on the same day, it said.

Kiwi Property is the latest company turning to the NZX's debt market, which has seen $2.77 billion of new listings in the 10 months ended Oct. 31, compared to just $480 million of equity listed through initial public offerings or compliance listings. Precinct Properties New Zealand tapped the debt market earlier this month, raising $100 million in an oversubscribed seven-year bond, paying annual interest of 4.42 percent. The 1.5 percent margin above the swap rate was the bottom end of Precinct's indicative range.

There is no public pool for Kiwi Property's offer, with all the bonds being reserved for clients of joint lead managers Deutsche Craigs and Westpac Banking Corp, co-managers Bank of New Zealand and Forsyth Barr and NZX participants and other approved financial intermediaries.

Kiwi Property's current gearing ratio is 31.2 percent - not including the sale of the Majestic Centre - and under its gearing covenant, the group's financial debt to total tangible assets must not exceed 45 percent. In November it said it had reached an unconditional agreement to sell its Majestic Centre office tower in Wellington to Investec Australia Property Fund for $123.2 million.

The stock recently fell 2.2 percent to $1.34 and has lost 0.7 percent over the past 12 months.


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