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[New offer] TrustPower bonds

Electricity generator and retailer TrustPower's up to $100 million senior bond offer provides investors with the opportunity to lock in a relatively high interest rate for seven years in an environment in which longer-term interest rates have been falling steadily.

Monday, September 27th 2010, 6:33PM

by Jenny Ruth

The issue allows TrustPower to extend the average duration of its debt profile, reduce its reliance on bank debt and to average down its interest costs.

 

The new bonds carry a 7.1% coupon, significantly lower than the rates on its previous senior bond issue made in December last year and January this year. The bonds maturing in December 2014 carry a 7.6% coupon while those maturing in December 2016 have an 8% coupon.

The December 2014 bonds ended trading last week at 6.65% while the December 2016 issue ended at 7%.

Another indication of how much longer-term interest rates have fallen is the yield on the December 2017 government bond has dropped from 5.66% a year ago to 4.85% last week.

Neither TrustPower nor its senior bonds have a credit rating but its gearing - 34% at March 31 - is relatively low. The prospectus shows of its total $575 bank facilities, $300 million remained unutilised at September 17.

TrustPower also has three issues of subordinated bonds - the senior bonds rank above these and equally with bank debt - totalling $265 million.

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