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AfDB prices NZD 100 million Kauri Bond

August 31, 2014

The African Development Bank (AfDB) successfully priced a NZD 100 million ($8.3 million) five-year Kauri benchmark due 27 August 2019 through TD Securities. The notes pay a coupon of 4.5 per cent and marks the first Kauri from the AfDB since February 2008.

AfDB said it made the decision to issue the new Kauri offering, its first in over six years, because conditions on the New Zealand dollar have become more favourable for issuers and investors.

The transaction was met with solid investor interest and priced the following day in line with guidance at a level of mid-swaps plus 20 basis points, which equates to 63 basis points over the New Zealand Government Bond (NZGB) of five per cent in March 2019.

AfDB's first Kauri offering in over six years was able to draw in extra investor attention for its rarity value. However given the advanced stage of the Bank's funding programme for the year, the deal size was capped at a maximum of NZD 100 million from the outset.

A total of seven investors from Asia participated in the transaction with orders coming from central banks and official institutions (40 per cent), asset managers (40 per cent) and pension funds (20 per cent).

AfDB Group Treasurer Pierre Van Peteghem said, "One of the main pillars of the Bank's funding strategy is its ability to diversify its funding sources by responding to investor demand across a vast array of capital markets worldwide. After the first foray of the Bank in the domestic capital market of Nigeria this past July, the launch of this 5-year bond marks the return of the Bank into the so-called 'Kauri' market consisting of NZD denominated securities, registered in New Zealand and issued by foreign issuers.

Favorable market conditions and increased name recognition due to sustained marketing efforts allowed the Bank to successfully raise NZD 100 million in this market after a 6-year absence. Despite lower annual funding requirements than its peers, the Bank will continue to pursue its funding diversification strategy in Africa and elsewhere."

"The Kauri market is buoyant," said Salvatore Aloisi from TD Securities. "Looking at New Zealand dollars, there is a really nice pick-up over Australian dollar yields and investors are comfortable with the currency because the economy is booming. We're getting good demand from domestic institutional investors for the Kauris and retail accounts are interested in Eurobonds. Issuers have been keen to take advantage of the thriving market, with the African Development Bank selling its first print in six years this week."

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Source: CPI Financial

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