Tower joins corporates seeking to tap demand for bonds

Tuesday 3rd February 2009

Tower is considering making an offer for up to $100 million of bonds, joining the throng of corporates tapping the market for better yields as interest rates slide.

Tower Capital may offer $80 million of five-year senior bonds, with oversubscriptions of $20 million, the insurer and fund manager said in a statement.

Tower wants to use the funds to repay debt and fund working capital, it said. The interest rate hasn't been set for the offer, which would be made this month.

Interest rates have fallen after Reserve Bank Governor Alan Bollard slashed the official cash rate by 150 basis points to 3.5%, extending the deepest easing cycle since the OCR was introduced in 1999. Bollard has said there is room to make further, smaller cuts to interest rates given the global economic downturn and dissipating inflation.

Tower company said preliminary indications of interest should be made to sale managers Forsyth Barr and Goldman Sachs JBWere.

Tower joins companies including Fonterra, Fletcher Building and Meridian Energy in tapping demand for fatter yields as interest rates slide. Fonterra if offering $300 million of six-year bonds paying a minimum 7.75%.

Fletcher, nation's biggest construction company in November offered $100 million of 2014 and 2016 notes offering 9% annual interest. State-owned Meridian Energy yesterday offered to sell fixed-rate notes maturing in 18 months or less at interest rates between 5% and 5.25%.

According to the depositrates.co.nz website, Fisher & Paykel Finance has five-year secured debentures paying 7.25% for up to $5,000, while a three-year term deposit at ANZ Bank offers 3.5%. National Bank's Thoroughbred Saver savings account pays 2.75%. All three come under the deposit guarantee scheme.

By Jonathan Underhill

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