Rates round-up: June 18

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Lombard receivers lower payout forecast; Kiwibank credit rating higher than big four; Rabobank downgraded BNZ completes $200m bond issue

Monday, June 18th 2012, 6:00AM

by Niko Kloeten

The receivers for failed finance company Lombard Finance and Investments have lowered the projected return to investors and indicated they will look at some form of claim against third parties.

John Fisk of PricewaterhouseCoopers said in the latest update that the receivers continued to investigate Lombard's transactions, and based on "current factual and legal assessment, it is likely that claims will be issued against third parties, with a view to making recoveries for the benefit of investors.

"We are not able to comment further on the exact nature of those claims at this stage because to do so may prejudice the claims," Fisk said.

The receivers have also lowered their estimate for how much investors will get back from between 15c and 22c in the dollar to between 15c and 20c.

Secured debenture holders have so far been paid $14.4 million out of a total amount owing of $111 million, representing 13c in the dollar.

The receivers realised $2.2 million from Lombard's loan book between October 11 and April 10, taking total net proceeds to about $20 million.

Kiwibank credit rating higher than big four

Fitch has assigned Kiwibank a credit rating of AA, higher than any of the big four Australian-owned banks, although its rating hinges on the support of its parent New Zealand Post.

Westpac, ANZ National Bank, ASB and BNZ are all rated AA- after Fitch downgraded them in February this year.

Fitch said it considered Kiwibank to have an "extremely high probability of support" from New Zealand Post and "Any change in NZ Post's ability and/or willingness to provide support is likely to be reflected in Kiwibank's ratings."

According to Fitch KiwiBank is also planning to use covered bonds to lengthen its maturity profile.

"Its strong loan growth has outpaced deposit growth over the past three years, making the bank more reliant on wholesale funding markets and, consequently, weakening its funding mix. In response, the bank has emphasised deposit growth to fund future loan growth, which should help stabilise its funding mix."

Rabobank downgraded

Meanwhile, Moody's has downgraded Rabobank's credit rating by two notches to Aa2 (the equivalent of AA-) as part of a mass downgrade of the Dutch banking system.

Rabo, which operates in New Zealand through Rabodirect, was one of five banks in the Netherlands to be downgraded at once, with Moody's noting some weaknesses in that country's financial system including falling house prices and high debt levels.

"Dutch households have some of the highest debt levels among western European countries, at 127% of GDP and almost 250% of gross income at year-end 2010," the ratings agency said.

BNZ completes $200m bond issue

The Bank of New Zealand has successfully raised $200 million through a seven-year bond issue that will see investors receive 5.57% per year.

The offer, to institutional and ‘habitual' investors, was for a minimum of $50 million and was priced at a margin of 2.15% above the seven-year swap rate.

Meanwhile, BNZ will make an early repayment on $350 million of subordinated, callable bonds due in 2017.

The bank was paying 8.42% on the bonds, which were issued in 2007, and had it used its option to reset the rate for five years at 75 basis points above the swap rate it would have only been paying investors 3.84%.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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