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Big Companies Better Placed To Weather COVID-19

Chapman Tripp’s latest NZX Top 50 Funding Composition report shows a “clear contrast” between the Top 25’s security position and that of the Second 25, reflecting the superior credit rating available to New Zealand’s largest companies.

Chapman Tripp Partner Cathryn Barber said the resilience this created had assisted the Top 25 to weather the COVID-19 storm.

The firm’s analysis is drawn from the Top 50’s annual reports as at 31 December 2020, and from Chapman Tripp’s direct experience advising Top 50 entities on their debt funding requirements.

Other findings include:

· many among the Top 50 opted as part of their COVID-19 response to increase or extend their funding arrangements and/or to raise equity or to pay down debt

· in some cases, this was a strategic decision, rather than being forced by circumstance, and the buffer capability was not activated

· entities with a range of creditors had more difficulty as getting a majority to agree to the same change of terms was often arduous and expensive, and

· the New Zealand retail bond market remains slow.

“The New Zealand economy has performed relatively well during the COVID-19 pandemic to date and business confidence is rising in all but the most affected sectors. But we expect that some uncertainty will remain until vaccination has delivered herd immunity to us and to our major trading partners and until the borders are open,” Barber said.

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“Most of the waivers obtained in the initial lockdown last year have now expired and companies are considering whether their funding mix is appropriate based on their experiences last year.

“For some, that will mean sticking with bank debt and their existing accommodative relationships. Others will want to explore new options.

“We anticipate that there will be an increased appetite for New Zealand retail bonds to lock in longer-term debt. We also expect that green and socially responsible financing will continue its growth trajectory,” Barber concludes.

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