Heartland Group's banking subsidiary is seeking $75 million through a five-year bond offer and will pay at least 3.5 per cent annual interest.
The listed financial services firm's licensed banking unit, Heartland Bank, today opened an offer for five-year unsecured, unsubordinated fixed-rate notes. The issue margin above the five-year swap rate, expected to lie between 1.75 and 1.9 per cent, will be set in a bookbuild on April 5.
At today's five-year swap rate of 1.7525 per cent, that implies annual interest of 3.5025-3.6025 per cent.
When Heartland flagged the offer last week, advisory firm Chris Lee & Partners estimated the rate would be set near 3.4 per cent. Heartland Bank currently offers 3.95 per cent on a five-year term deposit, according to interest.co.nz data.
Heartland restructured its businesses last year to separate out its Australian reverse mortgage to free it from the Reserve Bank's prudential rules.
It first tapped the listed debt market to help fund its lending programme in 2017. That $150 million, five-year bond, pays annual interest of 4.5 per cent and last traded at a yield of 3.02 per cent.
Listed companies have found NZX's debt market to be an attractive source of funding in recent years, as subdued interest rates have made it easier to secure cheap finance on long maturities.
About 88 per cent of Heartland Bank's $3.41 billion of funds come from retail deposits, and its tier 1 capital ratio of 13.25 per cent was above the minimum of 8.5 per cent.
Heartland's gross loan book expanded to $3.52 billion at Dec. 31, from $3.37 billion as at June 30, with strong growth in business and auto lending through the period.
The bond offer won't have a public pool, with all notes reserved for the joint lead managers and their clients, NZX primary market participants, and other institutional investors. The joint lead managers are Bank of New Zealand, Commonwealth Bank of Australia, Deutsche Craigs and Westpac Banking Corp.
Heartland shares rose 0.7 per cent to $1.51 at today's open.