SBS launches 10-year capital bond
SBS Bank, the country's biggest building society, has launched a 10-year capital bond for New Zealand investors.
The 10-year subordinated redeemable share has an initial interest rate of 6.75% until October 31, which is fixed for the first five years, then a quarterly floating rate will apply. The minimum investment is $10,000 and the bond will be available from today.
"The purpose of this offer is to support continued growth and the money raised under this offer will be treated by us as Tier 2 regulatory capital, as required by the Resrve Bank," according to the limited disclosure statement.
SBS Bank chief risk officer Mark McLean said the Invercargill-based bank is "keen for our customers to have the opportunity to participate in the SBS capital bond which is a much higher yielding product than anything we currently offer. As the SBS capital bond will be available through our retail channels we exclude any intermediaries, meaning any associated costs are also reduced, allowing SBS to offer the product at a great interest rate."
The bonds are subordinated redeemable shares issued by SBS Bank and are loss-absorbing. The limited disclosure document states that "if we experience financial difficulty, the SBS capital bonds can be written off completely. This means you could lose all of your investment."
The bonds are not quoted on any stock exchange and there is no established market to sell them. The bonds are subject to SBS Bank's right to repay on or after the five-year anniversary. There is no right for a holder to redeem before maturity, SBS said.