The Navy's troubled fleet of five Seasprite helicopters may soon be replaced by up to 11 refurbished older helicopters rejected by Australia in 2008 because they were considered unsafe and unsuitable.
But Defence Minister Jonathan Coleman said the air worthiness issues the Australians identified had been corrected and there were still plenty of "off-ramps" before any deal was done.
Australia ordered the helicopters in 1997 under the John Howard Government but the project was delayed when modifications ordered by Australia failed to meet performance standards or were too difficult to implement in the refurbished air frames.
According to AAP, seven of the 11 helicopters were originally built in 1963 to 1965 and the other four in the mid-1980s.
Dr Coleman said that what was on offer was up-to-date capability overall, not second-hand capability.
"The reality is we wouldn't buy it if it's not state-of-the-art capability that fits our need. We not going for 'this is cheap, let's grab it.' There's been a hell of a lot of work that has gone into it."
He was not sure how old the air frames were but the technology on military aircraft was upgraded "and that is actually the key functionality".
The Cabinet has given Defence officials approval to negotiate with the American manufacturers, Kaman Corporation, for the SH-2G Super Seasprite helicopters and a flight simulator in what a Navy source said was a "very good deal".
He would not be specific about the price but it is thought the 11 helicopters, worth $1.4 billion in 2008, would cost New Zealand between $130 million to $230 million depending on numbers and extras.
That compares with the nine NH90 helicopters that are under delivery for $770 million.
The present Seasprites operate from the Navy's two Anzac class frigates, Te Kaha and Te Mana, and the multi-role ship Canterbury.
The Defence Capability Plan released last year foreshadowed a programme to upgrade or replace the Seasprite fleet over four years from 2012.
The botched deal cost Australian taxpayers more than $1 billion in 2008 when the Australian Government told the Kaman Corporation it was pulling out of the deal.
The helicopters were a vital part of the defensive role in the Australian Anzac-class frigates and were meant to protect the frigates from hostile ships and submarines.
Kaman's vice-president of investor relations, Eric Remington, said last week that as part of the settlement with Australia Kaman "took title to the 11 aircraft so that we may offer them for resale".
He said the company was in discussions "with a number of nations" to sell the helicopters but refused to confirm New Zealand was one of the countries in negotiation.
Kaman had earlier said it was focusing on the three countries flying Seasprites: New Zealand, Egypt and Poland. It was also talking to three unnamed potential buyers, Nato and some nations in South Asia, South America and Eastern Europe.
The company denied allegations in Australia that the Seasprites were ever unsafe and said the United States military had operated an earlier version for decades without any serious problems.
Rumours have been circulating in Navy and Defence circles for weeks that the deal was about to be settled.
New Zealand has five Seasprite helicopters which were bought new.
The fleet had been troubled by corrosion and a lack of staff to keep them flying.
Last year then-Defence Minister Wayne Mapp said the New Zealand Seasprites were safe and very capable.
A Ministry of Defence report had earlier indicated only one of the five helicopters was serviceable in October 2010 and earlier last year only two were flying.
The first of Australia's Seasprites arrived in 2003 but within two years many deficiencies had been identified, including an inability to fly in bad weather and low light and a failure to meet Australian airworthiness certification standards. The Australian machines were grounded in 2006.
- additional reporting Audrey Young