Capital deal could free Kiwibank to return cash to shareholders

Kiwibank chief executive Paul Brock said he was relieved a deal had been reached with the Reserve Bank over its capital ...
Kevin Stent

Kiwibank chief executive Paul Brock said he was relieved a deal had been reached with the Reserve Bank over its capital structure.

Kiwibank may be able to return almost $250 million to its shareholders, after the Reserve Bank ruled two large bond placements could be defined as capital.

In April Kiwibank's shareholders NZ Post, ACC and the NZ Super Fund were forced to tip in another $247m cash, after the Reserve Bank questioned whether Kiwibank's capital notes met its capital adequacy rules.

Without the injection, Kiwibank may have faced credit rating downgrades.

Kiwibank was also forced to hastily cancel a $189m bond placement.

READ MORE: Reserve Bank spat forces Kiwibank to ask shareholders for $247m

On Thursday Kiwibank announced that the Reserve Bank had now issued a letter of non-objection to the bonds which it had earlier questioned.

"This decision follows some changes made by Kiwibank to address the concerns raised by the Reserve Bank."

Neither the Reserve Bank or Kiwibank has said what the issue of the bonds was at any point during the issue, although the NZ Super Fund maintained it was assured that the instruments met capital adequacy during due diligence it conducted ahead of buying a stake in the bank.

Kiwibank chief executive Paul Brock said that he was received the issue was now resolved.

"I'm delighted with this outcome, both for us and for our shareholders who supported us to ensure our capital position remained strong."

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Brock refused to comment on whether the money which investors poured in back in April.

"Decisions on capital composition are a matter for our shareholders and the Kiwibank board."

When the partial sale of Kiwibank was announced, NZ Post signalled it would return around $200m to the Crown, but in February, it announced only a $100m special dividend to the Crown.

 - Stuff

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