Precinct Properties to raise $100m in 7-year bond

Precinct Properties chairman Craig Stobo. Photo / Dean Purcell

Precinct Properties New Zealand plans to raise up to $100 million from a seven-year bond offer to repay bank debt.

The listed commercial property investor announced its plans for the offer last Thursday and released details today. It is offering $75 million of the bonds with up to $25m in oversubscriptions.

The indicative margin is 150-to-160 basis points above the seven-year swap rate, subject to a minimum interest rate of 4.4 per cent. The seven-year swap rate was recently at 2.96 per cent, implying Precinct will pay annual interest between 4.46 per cent-and-4.56 per cent. The margin and interest rate will be set on November 17 following the bookbuild and will be announced by Precinct via NZX shortly thereafter, it said.

Precinct's indicative margin is lower than the 165-to-180 basis points range Property For Industry announced with a similar offer last month. The industrial property investor completed its offer last week, selling $100m of seven-year bonds paying annual interest of 4.59 per cent, a margin of 160 basis points over swaps. Meanwhile, Meridian Energy sold $150m of seven-year bond in March with a coupon of 4.88 per cent or 150 basis points above the swap rate.

Precinct's offer opens today and closes on November 17. The bonds are reserved for clients of ANZ Bank, First NZ Capital and Forsyth Barr as joint lead managers and Hobson Wealth Partners as co-manager, along with NZX participants and other "approved financial intermediaries", with no public pool.

"We believe this option is well suited to Precinct's current strategy and will further improve our capital structure post issue," chair Craig Stobo said to shareholders at last week's annual meeting. "Diversifying our funding sources remains a core component of Precinct's capital management strategy. We will prudently consider future funding options which are well suited to Precinct's strategy and further improve our capital structure."

Precinct increased annual profit 17 per cent to $162.1m in the latest financial year ended June 30. Stobo said the company's gearing was now at 18 per cent, from 25.1 per cent at the end of 2017, after the company raised $150m selling four-year, fixed-rate subordinated convertible notes in September.

The shares rose 0.4 per cent to $1.29, and have gained 7.1 per cent this year.