Dunedin City Treasury refinances maturing bond

Dunedin (Tuesday, 19 April 2016) – The Dunedin City Council’s treasury company has successfully negotiated two new bonds, or medium term notes, totalling $95 million.

Dunedin City Treasury Limited Manager Richard Davey says the issues do not increase debt for the DCC group. The bonds replace a floating rate note of $90 million that matured on Friday, 15 April. The additional $5 million will be used to repay short term promissory notes that will fall due in early May.

One of the new bonds is for $65 million for a term of 10 years, with the other for $30 million for five years.

The new bonds were arranged by ANZ and Westpac.

Mr Davey says, “There was strong interest in the Dunedin City Treasury’s bonds and we received bids 1.6 times greater than the volume of bonds that were issued.”

“This illustrates the investment community’s confidence in Dunedin City Treasury and the DCC group, especially given our AA rating from Standard & Poor’s.”

The issues also help the DCC group as they lengthen the average term of debt from 2.4 years to 3.7 years.

“This reduces future refinancing risk and better matches the term of Dunedin City Treasury’s debt with the intergenerational assets of the group.”

Mr Davey says, “The refinancing of the maturity and the maturity of the related interest rate hedging will see the cost of funds for the DCC group reduce from 6.23% to around 5.90%.
The maturing floating rate note and hedging, coupled with the refinancing, means the group will save an estimated $1.9 million in interest a year.”

Dunedin City Treasury is owned by Dunedin City Holdings Limited (DCHL) and manages debt for the DCC and its companies. DCHL is in turn owned by the DCC.

ENDS

© Scoop Media