$US500M facility signed by N.Z.

Press, 9 April 1981, Page 22

$US500M facility signed by N.Z.

NZPA staff correspondent London New Zealand yesterday' signed a SUSSOOM syndicated, note facility described as “unique” in the international finance market. The Euronote issue has been arranged for the New Zealand Government by the Citicorp International Group and will be managed by a group of ten international banks led by Citicorp. The facility is similar in some respects to a revolving bank credit, but instead of borrowing directly from the managing banks, New Zealand will be able to issue notes in specified amounts up to SUSSOOM during the seven-year life of the facility. The notes will have maturities of three, six, or twelve months. The banks will underwrite notes issued by New Zealand and can hold them in their own portfolio or trade them in the secondary market. The notes can be rolled over at the end of the three, six, or 12-month periods as a new series or repaid. Citicorp said the notes issued under the facility — the first are expected to be issued in the next few days — would be placed with international investors including central banks, corporate treasurers, and treasury departments of major banks. The Euronotes are described as a hybrid between a Euro-loan and Eurobond.

New Zealand is guaranteed the full amount of the funds under the terms of the facility in much the same way as a loan, and the managers distribute the notes in much the same way as a Eurobond. The financing technique incorporated in the New Zealand facility was devised by Citicorp about two years ago and has since been tested on a number of smaller transactions, including one for the New Zealand Shipping Corporation. The facility signed yesterday is the biggest of its kind so far arranged. Managers are offered the notes at a discount which will vary, according to maturity, to provide a yield equal to quarter per cent over the

London Interbank offered rates.

The managers arc entitled to an underwriting fee if the Euronotes are not issued, and a management fee. An article on the Euronotes in a recent issue of the Institutional Investor said perhaps the most “seductive” feature of the loan from New Zealand’s point of view was the low cost. A West German banker was quoted as saying New Zealand was getting “a large sum of money at very attractive rates.” A London banker said New Zealand was basically getting a seven-year term loan al a quarter per cent above the London Interbank offered rate, when it usually would pay a split between a quarter and three-eighths of a per cent or perhaps a flat threeeighths per cent over seven years for a syndicated bank credit in today’s market. An almost equal appeal was the bank commitment, the article said: For seven years the banks were either committed to sell the Euronotes or take them on their own books. "Come hell or high water New Zealand Will get its money,” a financier commented. Speaking at the signing of the documents for the loan facility yesterday, the New Zealand high commissioner, Mr Les Gandar. said: “This is a very interesting day for New Zealand and for the banking community all round the world.” The Euronote facility arranged by Citicorp was “quite unique,” he said. The money was not needed for current consumption but for New Zealand’s further development, Mr Gandar said. “It is useful for us in the period ahead to borrow with such a degree of certainty on a roll-over basis.” It was originally intended that New Zealand would be able to draw its money in several currencies, but this was not pursued. Citicorp's vice-president, Phillip Cole.batch, told NZPA that the banks, instead, had made a foreign exchange

swap arrangement which 1 would have the same effect. The ten banks in the group managing the Euronote issue are Citicorp International Group, Lloyds Bank International, Manufacturers Hanover, Sumitomo Finance International, Amro International, Banque de Paris et Des Pays-Bas, County Bank, Orion Bank, Swiss Bank Corporation International, and S. G. Warburg and Company, Amro (Amsterdam-Rotter-dam) is a big Dutch bank; County Bank is a subsidiary of the National Westminster bank group; arid Orion is a consortium of banks based in London. • New Zealand already had a SUSSOOM syndicated bank credit with Lloyds Bank International which was renegotiated last year. One financial source, who described the terms of; the facility signed today as “quite astounding”' said they were even better than the Lloyds credit.