NZX data shows debt issuance towers above equity this year

Tuesday 7th April 2009

New Zealand companies raised 10 times more debt than equity in the first quarter, as falling interest rates and a weak economy spur demand for regular fixed payments.

Some $1.2 billion of new debt securities were sold through the NZX last quarter, the market operator said in a statement. That compares with about $141 million of new equity raised.

Companies lining up to sell debt include Contact Energy, which last week increased its sale of five-year bonds to $550 million from $300 million sought, as investors queued up for the 8% interest rate.

Demand for debt securities of well-rated companies is running hot because deposit rates have dwindled as the central bank cut interest rates, reducing the income for people dependent on their investment income. ANZ Bank offers 3.5% for $5,000 on term deposit over three years.

Some corporate still are choosing to tap the equity market. Freightways, the logistics company that owns New Zealand Couriers, today announced plans to raise $50 million in a share placement and offer to shareholders to reduce debt and strengthen its balance sheet.

Nuplex Industries this month raised about $133 million in equity capital, though it was forced to sell the shares at a deep discount and increase the size of the sale.

Total trades on the NZX rose 12% to 46,472 in the month of March, while the value of trade fell 29% to $1.85 billion. For the first quarter, total trades fell 14% to 116,688, valued at $5.14 billion.

The value of share trading on the NZSX Market fell 20% to $1.7 billion in March, while trading on the NZDX Market dropped 25% to $139 million. On the NZAX Market for small caps and start-ups, trading fell 34% to $1 million.

By Jonathan Underhill

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