Westpac to raise $8.8 billion in covered bonds

Photo / Richard Robinson

Westpac New Zealand plans to raise up to €5 billion ($8.8 billion) in covered bonds over the next five years to boost its funding requirements.

Chief financial officer Richard Jamieson said the first €1 billion would likely be marketed early next year.

The bonds are banned from being issued by banks in Australia because they give investors first rights over a pool of assets should the bank go under.

The Reserve Bank is finalising rules on covered bonds in New Zealand and has recommended they be limited to 10 per cent of a bank's assets. Jamieson said Westpac's issue would comply with the Reserve Bank's proposal as it had around $60 billion of assets and expected those assets to grow over the next five years.

Westpac's move follows that of Bank of New Zealand which raised €1 billion last month in a covered bond. BNZ also raised money in New Zealand last year through an issue.

But Jamieson said it planned to target Europe because the appetite was larger there.

He said covered bonds had been one of the few securities companies could still issue during the global financial crisis.