Kiwibank shareholders tip in $247 million of new capital

Three shareholders will subscribe for new shares in the bank.

NZ Post, the NZ Super Fund and ACC are to pour $247 million of capital into Kiwibank.

The three shareholders will subscribe for $247 million of common equity in Kiwi Group Holdings, effective on Monday, following a recent preliminary decision by the Reserve Bank over Kiwibank’s convertible capital instruments.

Shareholders will fund proportionate to their existing shareholdings, reflecting recent announcements by shareholders that Kiwibank’s capital ratios will be maintained should the Reserve Bank determine that the convertible capital instruments are not fully compliant.

Kiwibank remains strongly of the view that existing convertible capital instruments are compliant and is working with the Reserve Bank of New Zealand to resolve this matter, a Kiwibank statement said.

Additional reporting by BusinessDesk's Paul McBeth:

Wellington-based Kiwibank canned a $A175 million bond issue last month after being told those instruments didn't meet the Reserve Bank's capital adequacy framework and that earlier issues of a tier 2 convertible subordinated bond and additional tier 1 perpetual bond also didn't comply. Kiwibank today said its three shareholders subscribed to $247 million of common equity relative to their existing stakes as a response to the central bank's preliminary view.

"Kiwibank remains of the strong view that existing convertible capital instruments are compliant and is working with the Reserve Bank of New Zealand to resolve this matter," Kiwibank head of funding Geoff Martin said in a statement.

The Reserve Bank is reviewing the definition of bank capital, the measurement of risks that the banks face and the minimum capital requirements and buffers to set up a regime that provides confidence in the banking sector.

Kiwibank has $150 million of perpetual notes paying annual interest of 7.25% listed on the NZX, which recently traded at $103.25 per bundle of $100 face value. The bank's $100 million of bonds maturing in 2024 and paying annual interest of 6.61%, recently traded at a yield of 5.2%. The bonds' interest rate resets in 2019, at which time Kiwibank can also repay the debt.