Govt refinances P’corp, NZ Steel

Press, 23 July 1986, Page 36

Govt refinances P’corp, NZ Steel

PA Wellington The Government has refinanced part of the debt of Petrocorp and New Zealand Steel, Ltd, with SUSSOO million in Euromarket borrowing. It said the move will save SNZ4 to 5 million a year because of lower interest rates. The borrowing, at a floating interest rate currently at 6.5 per cent, will repay part of the companies’ existing debts which attract higher rates. Details of the SUSSOO million (SNZ93O million) floating rate note Issue to the Euromarket came yesterday In a statement from the Minister of Finance, Mr Douglas. “Annual savings to the Government against the possible costs of servicing existing debt will be in the order of $4 million

to $5 million, based on current exchange and interest rates,” Mr Douglas said. “The floating interest rate has been set at Libid — London Interbank rate — giving an effective coupon at the present time of a little under 6.5 per cent This is significantly below the interest rates on the project debt being refinanced.” A Treasury spokesman said the borrowing had been raised at the London Interbank bid rate. Most of the debt it replaced had been at the London Interbank offer rate, generally about one-eighth of a per cent higher than the bld rate, or more. He said Petrocorp and New Zealand Steel previously borrowed the money to finance their

own operations. The Government was now taking over that debt by borrowing to repay it, because it was able to obtain better rates. Mr Douglas said the restructuring of the two companies would involve the Government refinancing $1.7 billion worth of overseas debt in total. The spokesman confirmed this meant further borrowing would take place. ! The Government currently holds more than 80 per cent of New Zealand Steel as part of a restructuring arrangement, by which it takes over debts of more than SNZI billion. Restructuring of Petrocorp finances is also being considered by the Government.