BNZ capital raising

Bank of New Zealand plans to sell up to $150 million of Tier 1 notes at a margin of 400 to 425 basis points over the five-year swap rate, a market source who has seen the term sheet said.

Bids are due on Monday after a series of investor roadshows in New Zealand with the final margin to be announced on Tuesday, the source said.

The issue consists of perpetual non-cumulative shares expected to pay fully imputed dividends. The notes, to be issued by BNZ Income Securities 2 Ltd, are callable in 2014 and rated A+ by S&P and A1 by Moody's.

Bank of New Zealand, Forsyth Barr, Goldman Sachs JBWere (NZ) are jointly managing the offer.

The issue, announced this week, can take unlimited oversubscriptions and is only open to retail and wholesale investors in New Zealand.

Bank of New Zealand, a unit of National Australia Bank, is New Zealand's third-largest lender.

Proceeds of the offer will be used to fund general corporate purposes. Tier 1 is a form of liquid capital that banks are required to maintain as a cushion to protect bank deposits.

It is the closest type to equity and also the most expensive form of debt for banks.

BNZ raised a similar offer in 2008 when it sold NZ$448.4 million of Tier 1.

- Reuters